978-1285428222 Chapter 3 Lecture Note Part 2

Unlock access to all the studying documents.

View Full Document

Equitable Remedies—This form of relief originated in England from a different court system that

was able to provide relief not available in the common-law, called Curia Regis, court system.

These remedies have been taken over by the courts of law, which now have powers in equity

when monetary damages are not adequate or appropriate. Courts have a wide range of powers in

this regard.

Specific Performance. The court orders a party to complete a contract or other duty as promised.

Not used a lot because of the incentive problems created.

Injunction. An order directing someone to do something or, more often, not to do something or

face more severe sanctions. A temporary restraining order is short term, usually pending a

hearing to consider a motion. Preliminary injunction is longer term; in force until matter is

resolved. Permanent injunction is a final order, perhaps as part of a settlement, and may be in

force indefinitely. Courts use this when monetary damages are not adequate.

CASE: Pre-Paid Legal Services v. Cahill (E.D., OK, 2013)—Pre-Paid sells legal service plans

for monthly fees. Cahill was a successful sales rep for Pre-Paid. He quit and moved to a

competitor firm and tried to get other sales reps to move to the other firm with him. Pre-Paid

sued for breach of contract and tort and moved for an injunction to stop Cahill from exploiting

information he had from Pre-Paid. The Magistrate recommended the injunction be granted.

Decision: Injunction granted. Preliminary injunctions are not lightly granted. The moving party

must show that it will likely prevail on the merits, will suffer irreparable harm without the

Questions: 1. Assuming PPLSI is correct, and might win a damage award for Cahill’s actions,

what difference does the preliminary injunction make?

If not restrained from recruiting other sales associates at PPLSI that he knows are top performers

2.Would an injunction be a limitation on Cahill’s right to engage in free speech by talking to

other sales associates?

There is no right to engage in “free speech” of a commercial nature that violates a contractual

agreement. When lawsuits are settled out of court it is common to include a clause that the

Add. Case: Georgia State Licensing Board for Residential and General Contractors v. Allen

(Sup. Ct., GA, 2010)—State legislature required contractors to have a license issued by the

Board. If a county has requirements at least as strict as the state, the county may take care of the

matter. Muscogee County issued licenses, but had standards lower than the state. The Board held

the contractors did not have proper licenses and told them to cease working as contractors until

they got a state license. They protested, saying they were misled by the County and sued for

injunctive relief as their livelihood would be harmed by the lack of work. Trial court granted

preliminary injunction against enforcement. Board appealed.

Decision: No relief. Ignorance of the law is no excuse. Granting an injunction oppressed the

Appellate Stage—If one of the parties believes that an error of law has been made, that party

may appeal the decision. The principal function of the appellate courts is to ensure the fairness of

the trial—that the trial court correctly applied the law.

Add. Case: Bourke v. City of South Portland (Sup. Ct., Maine, 2002)–Some residents of

South Portland, Maine, were in a dispute with the city’s planning board. The residents appealed

a board decision to the trial court, which upheld the decision of the board on January 17. Copies

of the judgment were to have been mailed to attorneys for both parties, but the clerk failed to do

so. The residents did not get a copy of the decision until their attorney obtained one on March

17. The residents then filed a notice of appeal of the trial court’s decision to the state’s high

court on April 8.

Decision: Dismissed. “The plaintiffs’ appeal is untimely. A notice of appeal must be filed within

twenty-one days from entry of judgment.” The parties did not receive notice of the judgment due

to the court clerk’s error, but “Lack of notice of the entry by the clerk does not affect the time to

Arguments Before Appeals Court—The parties present their arguments through briefs and oral

arguments.

Add. Case: LaFollette v. Savage (7th Cir., 1995)–LaFollette sued Savage over a business deal

that went bad. Jury found for Savage; trial judge denied plaintiff’s request for j.n.o.v.; plaintiff

appealed.

Decision: “Plaintiffs now renew the argument that they are entitled either to judgment as a

matter of law or to a new trial on [certain claims]. They argue that the record includes no

credible evidence to support the jury’s verdict in defendant’s favor. We review the denial or a

motion for judgment as a matter of law de novo. …we will reverse the denial of the motion only if

Decisions by Appeals Courts—An appellate court may decide to affirm, reverse, and/or remand

the trial court decision. In reaching their decisions, appellate judges will write an opinion. The

majority opinion represents the court’s decision. Judges may write concurring or dissenting

opinions.

Enforcement Stage—If there is no appeal, or if appeal is unsuccessful, the judgment is final.

Under the doctrine of res judicata, the case cannot be considered again.

Enforcing Judgments—Plaintiffs are responsible for collecting monetary awards from

defendants. If defendant does not pay, the court can issue a writ of execution allowing an official

to seize property, if necessary, to satisfy the judgment.

Add. Case: New Maine Nat. Bank v. Nemon (Sup. Ct., Me., 1991)–Nemon borrowed $125,000

from the bank. The note stated he would be responsible for paying all costs of collecting the note.

He defaulted, the bank sued and judgment was entered for the bank. It obtained a writ of

execution against Nemon who was ordered to make weekly payments. He missed payments. He

was ordered to appear in court and failed to appear. He was ordered to produce documents and

failed to produce them. He was found in contempt of court and ordered to jail. His sentence was

stayed to allow him to “purge himself of contempt. He failed to do so.” An arrest warrant was

issued. Nemon then paid the balance due on the loan. The bank sued for the attorney’s fees it

incurred throughout this process. Nemon argued that any additional sums should not be

awarded.

Decision: The trial court has discretion to award attorney’s fees in such cases. The bank

submitted affidavits detailing its collection efforts against Nemon. The issue of attorney’s fees is

not barred by res judicata because Nemon’s actions prevented the bank from correctly estimating

Add. Case: Aqua Sun Invest. v. Henson (Ct. App., Tenn., 1993)–Aqua Sun sold time-share

condos in Florida. Henson, a TN resident, bought one but stopped making payments. Aqua sued

in FL, won a judgment and secured a writ of execution. A notice of sheriff’s sale was published

in a FL newspaper. A copy was sent certified mail to Henson. The sale was conducted and Aqua

submitted a winning bid of $100 and back taxes. It tried to enforce the judgment in TN. Denying

the relief sought by Aqua, the court held “this Court finds that it is not obligated to give full faith

and credit to the Florida Judgment in this case and further finds that to do so would be shocking

to the conscience of the Court under the facts and circumstances of this case and would further

violate the strong public policy of this State and would be offensive to the traditional notions and

Constitutional guarantees of substantial justice and fair play.” Aqua appealed.

Decision: Reversed. Tennessee follows the rule that Article 4, Section 1 of the U.S. Constitution

does not require that full faith and credit be given to foreign judgments that violate public policy.

International Perspective: German Trial Procedure

German rules of civil procedure give judges much more control over trial processes, as is true in

most countries. The judge decides what witnesses to call and questions them personally. The

whole procedure is less formal than in the U.S.

ALTERNATE DISPUTE RESOLUTION—Many disputes, especially in standard business

transactions, are resolved by ADR. Arbitration is the most formal and is often required by

standard form contracts.

Arbitration—Arbitration is a legal process in which the two or more persons agree to allow a

neutral person (arbitrator) to resolve their dispute. The advantages are: (1) because she is agreed

upon by the parties, the arbitrator has their trust; and (2) because the arbitrator is an expert in the

subject, less time is needed to educate her about the dispute. The Federal Arbitration Act states

that when parties agree to arbitrate, the decision is binding and may only be appealed under

limited circumstances.

Add. Case: EEOC v. Waffle House (Sup. Ct., 2002)–Baker signed an employment agreement

at Waffle House that he would arbitrate any employment dispute. Later, when he was fired for

having seizures while at work, he sued for ADA discrimination. The EEOC carried the suit

forward on his behalf and sued Waffle House in federal court. Waffle House contended that

EEOC had to arbitrate the matter.

Decision: Supreme Court held that EEOC was not bound by the arbitration agreement. Baker

Add. Case: Gilmer v. Interstate/Johnson Lane (Sup. Ct., 1991)–As a condition of employment

with a securities firm, Gilmer had to agree to arbitrate employment disputes under New York

Stock Exchange Rules. When he was fired, he sued, claiming his firing violated the age

discrimination law. Interstate moved to compel arbitration and the Federal Arbitration Act

(FAA). The trial court ordered a trial; appeals court reversed; Gilmer appealed.

Decision: Affirmed. The FAA was passed to overcome judicial hostility to arbitration; it places

“arbitration agreements upon the same footing as other contracts.” The Court has approved the

enforceability of arbitration agreements that arise from claims made under many federal

Add. Case: Mastrobuono v. Shearson Lehman (Sup. Ct., 1995)–Mastrobuono had a securities

account with Shearson and signed its standard agreement. He later sued, alleging Shearson

mishandled the account. The agreement contained a arbitration provision and a choice-of-law

provision (New York law). Shearson moved to stay court proceedings and to compel arbitration,

as provided by the terms of the agreement and the FAA. The court granted the motion. Under the

rules of the NASD, three arbitrators heard the case and awarded Mastrobuono $160,000

damages plus $400,000 punitives. Shearson appealed to the court to vacate the punitives. The

court vacated the punitive damages; the appeals court affirmed. Mastrobuono appealed.

Decision: Reversed; punitives should not have been vacated. The Act’s central purpose is to

ensure “that private agreements to arbitrate are enforced according to their terms.” The

Add. Info: State restrictions on arbitration—The Supreme Court struck down another state law

that was inconsistent with the FAA. In Doctor’s Associates v. Casarotto (116 S.Ct. 1652), the

Court struck down a Montana law that required that notice “that a contract is subject to

arbitration” must be “typed in underlined capital letters on the first page of the contract.” The

courts may not invalidate arbitration agreements under state laws applicable only to arbitration

provisions.

The Arbitration Agreement—Standard form arbitration clauses are often inserted in contracts.

Parties should use one written by an arbitration association, such as the American Arbitration

Association, to be sure it is a strong agreement. Most agreements are upheld.

Add Info: Challenging Arbitration Agreements—A study of hundreds of arbitration agreements

in employment dispute cases, that were challenged in state and federal court, showed that the

agreement was upheld in the vast majority of cases, whether the challenge to the arbitration

award was brought by the employer or the employee.

Add. Case: Khotka v. Geographic Expeditions (Ct.App., Ca, 2010)–Lhotka went on a

mountain climbing trip sponsored by GeoEx. The contract contained a dispute resolution clause

that stated that if a dispute arose the parties could first go to mediation. If that did not resolve

the matter, it would go to binding arbitration at the Am. Arb. Assn. under California law. It

stated that the maximum liability would be the cost of the trip purchased. Signing the dispute

resolution agreement was mandatory if one wanted to go on the trip. Lhotka died of an

altitude-related illness while on the trip. His mother sued GeoEx in California state court for

wrongful death. GeoEx moved to compel arbitration. The trial court denied the motion. GeoEx

appealed.

Decision: Affirmed. The agreement to arbitrate is unconscionable and, therefore, unenforceable.

The trial court properly declined to enforce the entire arbitration clause. The arbitration

agreement fails on both procedural and substantive grounds. The procedural element of

Selection of Arbitrators—Begins with a submission by which the parties refer a dispute to an

arbitrator (such as through the American Arbitration Assn.). After submission, the arbitrator is

selected and a hearing scheduled. Unlike court proceedings, in which case the parties are likely

to have little control over the judge assigned to the case, the parties must agree upon the

arbitrator (or panel of arbitrators). Most arbitrators are experts in the area of law that applies to

their cases. If they have a conflict of interest that they do not reveal, it may be fraud.

Add. Info: Judges go private—The growth of ADR has increased demand for those with the skill

and respect needed to make the process work. In arbitration, since the arbitrator has the power

to decide the matter, the parties have less control than in other ADR forms, so respect for the

arbitrator is crucial. In California, many retired judges, including members of the supreme

court, now work in ADR, most for arbitration firms. Able to charge as much as $500 an hour,

they do better than in public service.

Selection of Arbitrators—Most agreements specify how arbitrator(s) will be selected. Usually

one, but panels of three not uncommon. Many are attorneys, but that is not required—may be an

expert in the field, such as construction or labor.

Hearing Procedure—The parties agree to the rules of the hearing with or without the arbitrator’s

input. The arbitrator has power to enforce those rules. The hearing is normally closed-door,

conducted much like a trial but with less rigid rules about evidence and procedure.

Issue Spotter: Are There Limits on the Terms of Arbitration?

Employment arbitration agreements are generally binding. Employers do not draft individual

agreements for various employees. However, if the agreement goes overboard, so it may not be

valid. First, WeLuvPets says it will pick the arbitrator, but fails to specify who that is. Employers

do not have unlimited rights in this regard, such as by hiring a buddy to serve in that role. The

agreement should specify a recognized, qualified arbitrator. Second, requiring the employee to

pay half of unspecified fees is not likely to hold. There is no cap on the fees and the employer

knows that fees may deter employees from making a complaint. Courts do not look favorably on

that, so you should specify not only where arbitration would take place, but specifically what

fees, if any, the employee would be required if the employee filed for arbitration. The employee

would, of course, be responsible for any legal fees the employee incurred by hiring a lawyer, but

to help insure that the arbitration agreement is not seen as unfair to low-wage employees, the

employer might offer to pay filing fees.

The Award—After the hearing, the arbitrator reaches a decision, called an award, usually within

30 days. The award is usually in writing, but no justification (legal rationale) for the award need

be given unless required by the arbitration agreement. The courts review few decisions, but will

not allow an award that requires either party to commit a crime or that undermines public policy.

Appealing the Award—After an arbitrator delivers an award, the losing party may appeal.

However, courts rarely provide review of an arbitrator’s decision and overturn it unless there is

evidence of fraud, serious procedural misconduct, corruption or partiality by the arbitrator, or

exceeding authority in making an award. Arbitrators, like judges, are judicial officials; their

determinations are considered final in most cases; matters properly determined by arbitrators

cannot be litigated in court.

Cyberlaw: International Arbitration and Mediation of Domain Name Disputes

WIPO is playing an active role in offering mediation and arbitration services to settle domain

name disputes at reasonable cost. Over 1,000 disputes a year are submitted to the WIPO

Arbitration and Mediation Center; the results are generally enforceable worldwide.

Add. Info: International Arbitration: Large disputes often go to arbitration. 2007 there were 63

arbitration cases involving claims of more than $1 billion. The International Chamber of

Commerce, the London Court of International Arbitration, and the AAA’s Centre for Dispute

Resolution are favored locales.

Negotiation—The ADR process by which parties choose to work out their differences by

negotiation between themselves instead of litigation or arbitration.

Issues in Negotiation—Negotiation is bargaining, such as bargaining for a contract. A negotiated

settlement is usually a contract that is agreed upon to settle a dispute. As a contract, it is

enforceable in court; attorneys are usually involved in negotiations. Proper negotiations usually

head off litigation.

Stages of Negotiations—Most negotiations are handled by an agent, usually an attorney, who is

less likely to be emotional than the principals to the dispute. The negotiator must follow orders of

the principal, even if the negotiator thinks the position taken by the principal is foolish. Before

negotiations, the issues are studied from both sides to understand issues and identify strong and

weak points, potential results of litigation, and the course of action planned. The parties must

exchange information and generally there is compromise in the move to settlement. Results are

memorialized in a contract.

International Perspective: Arbitration and Cotton Contracts

Most commercial cotton contracts have a standard arbitration clause sending disputes to the

International Cotton Association in Liverpool. Resolution is quick and cheap. Some parties

ignore the award even if domestic courts order payment. In sketchy legal systems, such as China,

enforcement is difficult. The ICA posts a list of parties that have ignored awards as a way to

warn merchants about the possible problems of doing business with such parties.

Mediation—Mediation involves the use of a neutral outsider who helps the parties reach a

resolution to their dispute. Mediators essentially manage the negotiation process, arranging for

scheduling, setting the agenda, and maintaining the records of the dispute. Mediators cannot

settle disputes, as does an arbitrator. Most states do not regulate who may serve as a mediator,

but the obvious preference is for an experienced party. Some states requite mediators to be

trained (a certain amount of training to be a mediator) to be able to offer their services. There are

professional organizations for mediators that set standards and procedures for the profession.

Mediation Process—Mediators gets the parties to agree on ground rules, such as whether the

procedure, even if unsuccessful will be confidential. If so, anything revealed is not to be used in

court later if litigation results. The mediator also gathers information from the parties, usually

keeping them separate for much of that, discusses compromises and tries to move toward a

settlement that is memorialized.

Add. Case: Vitakis-Valchine v. Valchine (Ct. App., Fla., 2001)–Kalliope and David Valchine

began divorce proceedings. They attended court-ordered mediation to attempt to resolve the

dispute. Both were represented by counsel. Mediation produced a 23 page settlement agreement

that covered all essential matters. Kalliope then moved to set aside the agreement, contending

that she had been coerced by her husband, her husband’s attorney and the mediator. The judge

rejected the motion; Kalliope appealed.

Decision: Reversed. “As a general rule … a contract or settlement may not be set aside on the

basis of duress or coercion unless the improper influence emanated from one of the contracting

parties––the actions of a third party will not suffice. In this case, the record adequately supports

the finding that neither the husband nor the husband’s attorney was involved in any duress….”

Add. Info: Briefing clients—Mediators have found that parties to a dispute need to be briefed

before proceedings, not only so they understand how mediation works, but also so they get a feel

for what the mediator thinks is realistic in terms of settlement. That helps dash unrealistic

expectations and gets the discussion to the main points.

Add. Info: Mediator confidentiality—As in other states, the Pennsylvania Labor Mediation Act

specifically provides that “The mediator shall not produce any confidential records of, or testify

in regard to, any mediation conducted by him on behalf of any party in any type of civil

proceeding.” See Elizabeth Forward Sch. Dist. v. Pa. Labor Rel. Board, 624 A.2d 215

(Comm.Ct., Pa., 1993).

Add. Info: Mediation in the D.C. Courts—In the superior (trial) court of D.C., civil cases go to

ADR. The court determined the type at an initial conference. Mediation is chosen almost 3-1

over arbitration. Most cases are mediated in less than two hours. After an initial face-to-face

session, the mediator shuttles between the two sides to reach a compromise. The results are

non-binding, but most cases are ended this way.

Innovative Forms of ADR—Parties are free to modify traditional forms of ADR. The courts

have adopted some forms to assist in reducing the amount of litigation.

Add. Info: Minitrials—The mini-trial is not a trial, but rather a highly structured settlement

process. It is sometimes referred to as an information exchange, a mock trial, or an advisory

proceeding. The parties agree on the structure and ground rules, such as confidentiality, and

usually hire an adviser to move things along.

Add. Info: Summary Jury Trials—A summary jury trial is the jury equivalent of a minitrial.

They are structured like a trial, with presentations based on depositions and other documents

because witnesses are generally not allowed. An advisory jury is seated that does not know that

the proceedings are not binding. Each side gets a relatively short time to present its case. The

judge gives the jury a simple instruction about the law to apply and the jury reaches a verdict.

Then the parties decide if they wish to settle or go ahead with a full trial. However, of those

summary trial cases that have gone on to a full trial, the subsequent full-trial decision has been

very consistent with the summary-trial decision.

Discussion Question

Most firms find arbitration and mediation clauses to be superior to litigation, which tends to be

more costly and take longer. Of course, the potential litigant faces the same issue, so most people

think carefully before suing. Arbitration is binding through conclusion. An agreement to mediate

does not force binding resolution, but has a high success rate and has the advantage of being less

adversarial than arbitration, which tends to encourage reasonable settlements with less bitterness.

Case Questions

1. (answered on the Internet for students) Affirmed. An appellate court may direct the entry of

judgment as a matter of law when it determines that the evidence was erroneously admitted at

trial and that the remaining evidence, properly admitted, is insufficient to continue a submissible

2. (answered on Internet for students) Reversed and remanded. Trial courts have wide judicial

discretion in partition actions to use equity to make a fair and just division of property among the

parties. Great flexibility may be used in such cases. However, the equitable powers do not

3. The Supreme Court, citing the commerce clause, held that federal law controls. The Federal

Arbitration Act gives strong presumption that arbitration clauses will be upheld and that there

cannot be appeal to the courts. “Contracts to arbitrate are not to be avoided by allowing one party

4. (answer on Internet for students) The NLRB was correct. Public policy encourages mediation

5. The Supreme Court reversed the Florida high court. The claim that the contract was illegal

because it violated the Florida usury law was a matter to be determined by arbitration, not a

court. The arbitration clause included all disputes, which would include this claim. There was no

6. (answer on Internet for students) The bank requested the court do dismiss Paranzino’s case.

The court found that she “willfully and deliberately disregarded the confidentiality agreement by

Ethics Question

Companies treat lawsuits in a cost/benefit analysis, not from what would provide the greatest

good. It would benefit everyone if those who bring bad suits were forced to bear litigation costs,

but that is a public good that the other side must bear for little gain and some risk that, if things

Most legal ethics experts do not think it ethical, even if legal, for law firms to accept

payments in exchange for a promise not to represent future clients against a company. The firm is

usually given the payment because it has built expertise in a difficult area and so is the firm most

Essay Questions and Answers Based on Cases:

1 Thomas sued his former employer for racial, sexual, and national origin discrimination in

violation of two civil rights laws. During pretrial negotiations, the employer offered Thomas

his job back “without prejudice,” meaning that it would not affect some of his claims in the

lawsuit, such as for mental distress, but if he returned to work, he could not claim he was

owed back wages from the date from which he could have started working. Thomas refused

the offer. The employer asserted that it should have the right to present testimony to the jury

about its offer that was rejected. Thomas said that the negotiations were completely

confidential and there could be no testimony. Who was right? [Thomas v. Resort Health

Related Facility, 539 F.Supp. 630, E.D.N.Y. (1982)]

Answer: The offer could be used in testimony in court. The Federal Rules of Civil Procedure

generally preclude information that is gleaned from negotiations from being used as evidence,

but the employment offer was not part of a bargain–that is, he was not asked to give up the

lawsuit or any part of it–it was a unilateral offer that was rejected. The offer was legally

unrelated to the other parts of the lawsuit; it only related to the length of the period during which

2 Gaeth accused Deacon of assaulting him. Gaeth’s attorney sent Deacon a letter asking him if

he had insurance coverage and if he had a lawyer. Deacon replied that he did not. Gaeth later

filed suit in Maine court, claiming that Deacon hit him in the face at a party at a college,

causing injuries. Gaeth was not able to find Deacon. A process server could not locate him.

Gaeth then published a notice in a local newspaper in Maine for three weeks notifying

Deacon of the complaint. Letters mailed to old addresses were returned by the Post Office.

The court then entered a default judgment against Deacon for failure to file a responsive

pleading to the complaint. Gaeth was awarded $75,000 in compensatory damages, $25,000 in

punitive damages, plus interests and costs. After the judgment, a new address for Deacon was

found, and he was notified of the judgment. He responded, but the trial court affirmed the

original judgment. Deacon appealed. Was the publication in the newspaper adequate notice of

the suit? [Gaeth v. Deacon, 964 A.2d 621, Sup. Ct., Maine, (2009)]

Answer: Service by publication given to an out-of-state defendant was not reasonable to give

actual notice of the lawsuit and did not meet requirements of due process. Publication was in the

county where the plaintiff lived. Defendant’s only connection with Maine was his previous

attendance at college in a different county in Maine. He had no known connection with the

Internet Assignment

Cornell University Law School, Federal Rules of Civil

Procedure:

www.law.cornell.edu/rules/frcp/

Cornell University Law School, Federal Rules of

Evidence:

www.law.cornell.edu/rules/fre/

Cornell University Law School, Federal Rules of

Criminal Procedure:

www.law.cornell.edu/rules/frcrmp/

Rules of court play a critical role in legal proceedings. The Federal Rules of Civil Procedure

govern both the trial process and the pretrial discovery process, often allowing parties to settle a

civil dispute before going to trial. Rules of evidence control what can or cannot be admitted into

trial, such as hearsay evidence. Rules of criminal procedure ensure a fair, impartial proceeding.

Browse the Web sites listed here to see key elements of the federal rules in these areas.