Winkler Outlines

TABLE OF CONTENTS

1. BUSINESS ORGANIZATIONS ........................................................................1

2. CIVIL PROCEDURE I .................................................................................38
3. CIVIL PROCEDURE II ................................................................................56
4. CONSTITUTIONAL LAW I ..........................................................................78
5. CONSTITUTIONAL LAW II .......................................................................108
6. CONTRACTS I.........................................................................................132
7. CONTRACTS II........................................................................................152
8. CRIMINAL LAW ......................................................................................190
9. CRIMINAL PROCEDURE...........................................................................211
10. EQUITIES AND REMEDIES .......................................................................247
11. EVIDENCE ..............................................................................................269
12. FEDERAL ADMINISTRATIVE LAW ............................................................287
13. PROPERTY I ...........................................................................................325
14. PROPERTY II ..........................................................................................344
15. SECURED TRANSACTIONS .......................................................................365
16. TAXATION .............................................................................................389
17. TORTS I .................................................................................................426
18. TORTS II ................................................................................................446
19. WILLS, ESTATES, AND TRUSTS ...............................................................470

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BUSINESS ORGANIZATIONS
Professor E. Christopher Johnson, Jr., Hilary Term 2011

INTRODUCTION TO THE LEGAL STRUCTURES FOR BUSINESS

1. The Basic Legal Forms of Business Organizations Include…
a. The Sole Proprietorship
b. The Partnership
i. General Partnership
ii. Limited Liability Partnership
c. The Corporation
d. The Limited Liability Company (LLC)
2. Two Important Differences in the Various Business Structures
a. Tax treatment of the business’s profits, and
b. Liability exposure of the owners for the business’s debts and other liabilities
3. Breaking Down the Forms of Business Organization
a. The Sole Proprietorship (default category for one natural person)
i. A person undertakes a business without any of the formalities associated with
other forms of organization; the individual and the business are one and the same
for tax and legal liability purposes.
ii. For liability purposes, the individual and the business are also one and the same.
Thus, legal claimants can pursue all assets of the owner, not simply the assets
used in the business.
iii. No state filing is necessary (although certain businesses may have to be licensed)
1. The proprietorship does not pay taxes as a separate entity. The
individual reports all income and deductible expenses for the business on
her personal income tax return. These earnings of the business are taxed
to the individual regardless of whether they are actually distributed in
cash. There is no vehicle for “sheltering” income from tax.
b. The Corporation
i. The corporation is the most common legal structure for large businesses.
ii. One major advantage of the corporation, compared to the sole proprietorship, is
that a corporation’s owners (stockholders or shareholders) are generally
protected from personal liability.
iii. Corporation is considered a tax-paying entity. A corporation must pay taxes on
its income – just like a real person.
iv. Because the business does not get any deduction for dividends paid, the earnings
of a corporation are, in essence, taxed twice. First, the corporation pays a tax
on its income. Second, the owners of the corporation pay a tax on the part of the
corporation’s earnings that is distributed to them as dividends.
v. The current maximum income taxation rate on corporate income is 35%; the
maximum rate on individual income is likely to be approximately 40% when
federal and state taxes are considered.
c. The Partnership
i. Partnerships are business entities that consist of two or more owners.
ii. A partnership is treated like a proprietorship for tax and liability purposes.
iii. Earnings are distributed according to the partnership agreement, and taxes are
paid only at the personal level on the partner’s share of that income, so called
pass-through taxation.
iv. For liability purposes, each of the partners is jointly and severally liable. Thus,
an injured party may pursue one or more of the partners for any amount. The
claim need not be proportional to invested capital or earning distribution.

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d. The Limited Partnership

i. Limited partnerships are a hybrid form of organization. It is like a partnership
(or sole proprietorship) for tax purposes. And, it is somewhat like a corporation
for liability purposes.
ii. A limited partnership is a partnership that has both limited and general partners.
1. The general partner assumes the management responsibility and
unlimited liability for the business.
2. The limited partner has no voice in management and is legally liable only
for the amount of capital contribution plus any other debt specifically
accepted. The limited partner thus looks a lot like a shareholder in a
corporation.
e. The Limited Liability Company (LLC)
i. The limited liability company is a business structure developed to provide both
the protection from liability of a corporation and the protection from double
taxation of a partnership.
ii. The owners of a limited liability company are not individually liable for the
company’s debts.
iii. The limited liability company is not a tax paying entity. Income taxes are only
paid once – by the owners of the limited liability company when a part of the
company’s earnings is distributed to them.
iv. The existence of an LLC depends on compliance with the state limited liability
company law. These laws differ from state to state.
f. The S Corporation and Not-for-Profit Corporations
i. The S Corporation
1. Like the LLC, the S corporation is afforded the tax status of a
partnership, but the protection from legal liability of a corporation.
2. To qualify for S corporation tax status, the business must meet a number
of rather restrictive conditions in the Internal Revenue Code, including
being a domestic corporation, owned wholly by U.S. citizens, with 75 or
fewer stockholders.
ii. Not-for-Profit Corporation
1. Per the IRS and individual states, certain corporations that operate for the
public benefit need not pay corporate income tax.
2. In addition, individuals can deduct gifts to these “non-profit”
corporations from their tax returns.
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THE SOLE PROPRIETORSHIP

1. What is a Sole Proprietorship?
a. There is only one person involved; there is no distinction between the business and the
owner. The business and the owner are the same actual person and the same legal person.
b. One person owns the enterprise, is responsible for management decisions, receives all
profits and bears all loss.
2. How Do You Form a Sole Proprietorship? You don’t have to do anything; it is automatic. It is
a default form of business organization. If you are an individual person and you have not filed
any paperwork with the state, you are, by default, a sole proprietorship.
3. Major Concerns with Sole Proprietorship
a. Liability—A person who sues you can go after BOTH the business assets and your
personal assets. All liability is on the owner; no liability protection.

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b. Taxation—A sole proprietorship is considered a disregarded entity regarding taxes, i.e.,

entity is disregarded for tax purposes. Instead, the person reports the income and
expenses directly on their personal tax return.
4. If You Want a Business, but Don’t Want Liability—Form a corporation; you can’t do a
partnership if it’s only you as an individual.
5. Can you Sell a Sole Proprietorship? If you sell it, what you are really selling is your assets
because you really don’t have a separate legal entity like you do with corporations. The owner
owns the assets directly.
6. Can a Sole Proprietorship Have Employees? Yes. It remains a sole proprietorship so long as
one person owns the business.
a. Is a proprietor liable to third parties, in contract or in tort, for the acts or omissions of
his employees? Proprietor may be liable in both contract and torts. The answer is found
in the application of agency law.
b. Liability of Sole Proprietor for Contracts of his Employee: Refer to Contracts Liability
Under Agency Law.
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AGENCY LAW
1. What is an Agency?
a. The relationship arises when one person (“principal”) manifests assent to another person
(“agent”) that the agent shall act on the principal’s behalf and subject to the principal’s
control, and the agent manifests assent or otherwise consents so to act. See Restatement
Third of Agency (RTA) §1.01.
i. Manifestations—oral, written, conduct or actions.
b. Whether a relationship is characterized as agency in an agreement between parties or in
the context of industry or popular usage is not controlling. RTA §1.02.
2. Who are the Players?
a. Agent—person, who by mutual assent, acts on behalf of another and subject to the
other’s control.
b. Principal—person for whom that agent acts.
c. Third Party—person with whom the agent contracts on behalf of the principal.
3. Principal Liability—Contracts and Transaction with Third Parties—The Agent must have
authority to change the legal position of the Principal. There are four types of authority that bind
the principal.
a. Actual Authority—present if the principal’s words (written or spoken) or conduct would
lead a reasonable person in the Agent’s position to believe that the Principal had
authorized him to so act. See RTA 2.01, 2.02, 3.01.
i. Express—the literal words or actions of the grant of authority by principal to
agent.
ii. Implied/Incidental—acts usual and incidental to the act directly authorized,
including acts reasonably necessary or generally considered appropriate to
accomplish the agency.
iii. Limiting Actual Authority—talk to the agent (see Hayes v. National Service
Industries).
b. Apparent Authority—words or conduct of the principal would lead a reasonable person
in the Third Party’s position to believe that the Principal had authorized the agent to so
act. See RTA 2.03. (The focus is on the principal’s actions that lead a third person to
reasonably believe the agent has authority to act.)
i. NOTE—everything at some point must trace back to the principal because it’s the
communication between the Third Party and the Principal that is at issue.

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1. The communication (manifestation) can be oral, written, or the power of

position (the Principal puts an agent in the position to communicate with
the Third Party or the world at large that this is the person who can affect
my legal position).
ii. Limiting Apparent Authority—talk to the third party. For apparent, look at the
manifestations between principal and third party (see Hayes).
c. Ratification (what happens after the fact)—(RTA 4.01) defined as…
i. The affirmance of a prior act done by another, whereby the act is given effect as
if done by an agent acting with actual authority;
ii. A person ratifies an act by
1. Manifesting assent that the act shall affect the person’s legal relations, or
2. Conduct that justifies a reasonable assumption that the person so
consents.
iii. I.e. ratification occurs when a principal affirms a previously unauthorized act.
Ratification validates the original unauthorized act and produces the same legal
consequences as if the original act had been authorized/agent acted with actual
authority. If, for instance, a party ratifies a contract, the ratification binds both
that party and the other party to the contract. Ratification typically concerns “the
making or breaking of a contract.”
iv. In order to have ratification, there must have been some positive step that shows
that the principal accepts this contract.
v. NOTE—you have to make sure you are going after the right party for the right
reason. Remember, once the Principal ratifies the contract, it goes back to the
original date of the contract. It’s treated as if the contract was correctly entered
to in the beginning.
d. Estoppel (what happens after the fact)—Estoppel can apply even though the claimant
CANNOT show a manifestation attributable to the asserted principal (unlike apparent
authority).
i. RTA §2.05 (Estoppel to Deny Existence of Agency Relationship)—Estoppel
imposes liability on a person (principal) for...
1. A transaction purported to be done on the principal’s account to persons
(TP) who have changed their position because of their belief that the
transaction was entered into by or for the principal, if
a. The principal intentionally or recklessly caused such belief;
b. Knowing of such belief and knowing that others might change
their positions because of it, the principal did not take
reasonable steps to notify them of the facts.
ii. NOTE—Justifiably induced would be a reasonable standard. Therefore, the third
party has to have a reasonable belief, which is an objective standard.
4. Agent Liability—when determining whether an agent is liable or not depends on whether the
agent’s principal is disclosed.
a. Disclosed Principal—The third party knows there is a principal. In these situations, the
agent may or may not be a party to the contract.
i. Identified Principal—see RTA §6.01
1. The principal is bound by the contract and is a party to the contract.
2. The agent won’t be a party to the contract, unless the agent and the third
party agree otherwise.
ii. Unidentified Principal—see RTA §6.02
1. The agent will also be a party to the contract because the third party
doesn’t know who the principal is. If the agent gets the third party to

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agree to let the agent off the hook, then the agent won’t be a party to the
contract.
b. Undisclosed Principal—the third party doesn’t even know that a principal exists. The
third party thinks the agent is the principal and not acting for a principal.
i. When an agent is acting with actual authority makes a contract on behalf of an
undisclosed principal, the Principal is bound by the contract (is a party), and
unless they agree otherwise, the agent and the third party are parties to the
contract, and the principal (if a party) and the third party have the same rights,
liabilities, and defenses against each other as if the principal personally made
the contract – subject to 6.05-6.09 though. See RTA §6.03.
ii. Look to authority (go through the steps above). If there is the proper authority
BOTH the Principal and Agent are bound by the contract.
c. Agent’s Implied Warranty of Authority—RTA §6.10, someone purports to make a
contract with third party but lack ability to bind, then they may have some liability.
d. Termination of Agent’s Power §3.06
i. Actual Authority
1. Death of Principal or Agent
2. Lack of capacity of principal
3. Agreement
4. Manifestation of principal to agent
ii. Apparent Authority
1. When no longer reasonable for third party to rely on agent
a. Ex. public firing of employee
2. Manifestation by principal to third party
5. Tort Liability—a principal is liable where there is a master/servant (employer/employee)
relationship and the servant is acting within the scope of their employment.
a. Master/Servant (Employer/Employee) Relationship
i. Doctrine of Respondeat Superior—P can be liable even though P is not
personally negligent. If A is negligent and injures TP, the doctrine of respondeat
superior will impose liability on P – even though P did nothing wrong. P’s
liability is “vicarious” or “secondary,” and does not depend on P’s being
negligent. Only applies to principal-and-agent relationships called
Master/Servant
ii. Control Requirement—Master must have control over the details of the job (day-
to-day performance of the agent’s task, but not necessarily every move the
servant must make).
1. Difference Between a Servant and an Agent—The difference is the
amount of control. Not all agents are servants (and not all principals are
masters). But all servants are agents (and all masters are principals).
Not all employees are servants; the master has to have control over the
day-to-day performance of an employee in order to be a servant.
2. Factors for Determining if Agent is a Servant
a. If you have significant control over the person, the person is
most likely a servant.
b. The higher level of skill, the less control is being exercised.
c. The length of time the person is employed—the shorter time the
person works for you, it is likely they are an agent, but not
necessarily a servant.
iii. Scope of Employment—the master is liable for the torts of a servant ONLY if the
tort was committed within the scope of employment, see RSA §219. Commuting
is not within scope of employment.

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1. Frolic—sometimes a servant leaves the appointed job to engage in

personal business. Case law would say that such a servant was on a
“frolic.” Torts committed during such periods should not be a basis for
vicarious liability.
a. Example—getting personal Red Wings tickets during delivery.
2. Detour—courts may strain to say that a servant was merely on a
“detour,” during which torts committed by the servant would create
vicarious liability
a. Example—getting lunch while making delivery
iv. Intentional Torts—although it might seem that an intentional tort would never be
within the scope of one’s employment, circumstances might indicate otherwise.
1. Example—bouncer assaulting/using force against a customer, expected
to occur by the master.
b. Independent Contractor—while hired to do a job like an employee, an independent
contractor is not told specifically how to do it, see RSA §2.
i. The torts of an independent contractor generally are not attributable to the person
who hires him.
ii. Independent Contractor Might be an Agent or Non-Agent
1. Agent Independent Contractor—P won’t be liable for any torts
committed by the independent contractor, but would be liable in contract.
2. Non-Agent Independent Contractor—P would not be liable for
independent contractor’s actions either in contract or tort.
6. Other Agency Relationships
a. Lawyer-Client Relationship—a lawyer acts on behalf of the client, representing the
client, with consequences that bind the client
b. Hayes v. National Service Industries—lawyer (agent) had apparent authority to enter
into a settlement agreement on client’s (principal’s) behalf. An act of an agent within the
scope of his apparent authority binds the principal (even where the principal did not agree
to the agreement).
7. Liability Dependant on Disclosure of Who the Parties Are

Note: Agency law is not just a sole proprietorship issue; every legal form has agents.
_____________________________________________________________________________________

FINANCIAL STATEMENTS
1. Balance Sheet: Describes a specific time. Provides a snap shot in time- it is conservative
a. What is on the Balance Sheet?
i. Assets = cash, property
ii. Liabilities = loans, accounts payable, bank notes
iii. Shareholder’s/Owner’s Equity (what’s leftover) = A – L
iv. A= L + Owner’s Equity
v. So if Asset goes up and Liability stays the same then OE has to go up
2. Income Statement: Tracks the income the business is experiencing. It covers a specific period
of time (year, month, a week, etc…).
a. What is on an Income Statement?
i. Revenues = sales
ii. Expenses = cost of goods sold, administration
iii. Profits = are an account devise and tax devise – doesn’t represent real movement.
iv. Losses = account devise and tax devise – doesn’t represent real movement.
b. Formula: Sales – COGS (cost of goods sold) – Salaries – Other Expenses – Depreciation
= Profits Before Tax – Taxes = Net Income

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c. Matching Concept (accrual basis) = match our expenses with our revenues. What do we
mean by this?
i. If we spend $50,000 on a brand new machine that will last for 10 years. My cash
assets have gone down by $50,000, but I won’t use it all up on one year
(depreciation). To match revenue with expense for the year – each side $5,000.
ii. Example: revenue of $20,000 and expenses of $5,000 for general expenses and
$5,000 for the machine. How much have I made for the year (profit for the year)
$10,000. Can’t go spend b/c technically you are still $45,000 in the hole for the
machine. On paper they have money, but they don’t physically have the cash.
3. Cash-Flow Statement: Money coming in and going out.
a. The cash flow statement covers a period of time, normally the same period of time as the
income statement.
b. It’s important to add this to both the income statement and the balance sheet.
c. Formula: Cash Flow = Profit After Taxes + Depreciation – Investment
4. What is the most important statement to a creditor?
a. Cash flow statement, so you know if they are able to pay.
b. Also, a balance sheet to see what the assets of the company are.
5. What is the most important statement to an investor?
a. The income statement – to see what the profits are. As an individual investor you are
more interested in what your share will be worth.
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PARTNERSHIP LAW
1. Partnership—an association of two or more persons to carry on as co-owners of a business for
profit, see RUPA §101(6).
a. Persons—“persons” in the partnership means any separate entity. For example, a
corporation can be a partner is a partnership.
b. Distinction Between RUPA and UPA
i. RUPA §201—A partnership is “an entity distinct from its partners.”
ii. UPA—Generally embraces an “aggregate theory,” i.e., it considers a partnership
not as a separate legal person but rather is merely the aggregate of its partners.
iii. NOTE—Not one or the other is correct; there are certain circumstances where a
partnership is treated as a separate legal entity and other circumstances where a
partnership will be treated as an aggregate of the partners.
2. Formation of a Partnership (RUPA §202)
a. No formal agreement or filing is required; where there is an association of two or more
persons and no filing, the default is a partnership. Intention is irrelevant.
b. The partnership may be by express agreement of the parties or based on facts and
circumstances.
c. The right to a share of profits creates a rebuttable presumption that the person receiving
the share is a partner in the business.
d. But if the profits were received as payment of wages, of a debt, of rent, of an annuity or
other retirement or health benefit, etc., then no inference is drawn, i.e., not necessarily a
partner in a business.
3. Three Primary Sources of Partnership Law
a. Partnership Agreement—the first place to look is the partnership agreement. If there is
no partnership agreement, look to the state statute, see RUPA §103.
b. Statute (RUPA)—only applies if the partners have not agreed to the contrary. The
statutes “provide default rules, not immutable prescriptions,” and thus provide great
flexibility.
c. Common Law and Equity—fills in the gaps in the statutes

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4. Impermissible Provisions in a Partnership Agreement (see RUPA §103(b))

a. A partnership agreement MAY NOT:
i. (1) Vary the rights and duties under 105 except to eliminate the duty to provide
copies of statements to all partners.
ii. (2) Unreasonably restrict the right of access to books and records.
iii. (3) Eliminate the duty of loyalty EXCEPT
1. The PA MAY identify specific types or categories of activities that do not
violate the duty of loyalty, if only manifestly unreasonable
2. All of the partners or number or percentage specified in a PA may
authorize or ratify, after full disclosure of all material facts, a specific act
or transaction that otherwise would violate the duty of loyalty.
iv. (4) Unreasonably reduce the duty of care
v. (5) Eliminate the obligation of good faith and fair dealing, but the partnership
may prescribe the standards by which the performance of the obligation is to be
measured, if the standards are not manifestly unreasonable.
vi. (6) Vary the power to dissociate as a partner, except to require notice to be in
writing.
vii. (7) Vary the right of a court to expel a partner listed in 601.
viii. (8) Vary the requirements to wind up the partnership business in cases specified
in 801(4), (5), or (6).
ix. (9) Vary the law applicable to a limited liability partnership under 106(b)
x. (10) Restrict rights of third parties under this act.
5. Partnership Property
a. Sections 203
i. Property is acquired by a partnership is property of the partnership and not the
partners individually.
b. Section 204
i. Property is partnership property if it is titled in the name of (1) the partnership, or
(2) one or more of partners, as partner(s).
ii. Property is acquired in the name of the partnership by a transfer to (1)
partnership, or (2) one or more partners in their capacity as partners.
iii. Property is presumed to be partnership property if purchased with partnership
assets/funds (regardless
iv. Property acquired in the name of one of more of the partners (without indication
of person’s capacity as partner) is presumed to be separate property.
c. How Does the Partnership Acquire Property?
i. Property can be acquired through the business assets or individual partner assets.
ii. For the property to be part of the partnership, there must be some sort of transfer
that fits the requirements of RUPA §204 (above).
iii. If a partner owned property before the formation of the partnership, it does not
automatically become part of the partnership even if the partnership is using it.
There has to be some sort of transfer [RUPA §204(a)].
iv. The property will be presumed to be separate property, even if used for
partnership purposes, where the property is acquired in the name of one or more
partners, without indication in the instrument transferring title to the property of
the person’s capacity as a partner or of the existence of a partnership and without
use of partnership assets. RUPA §204(d).
v. If the property does not have a title, sell the property to the partnership or
acknowledge the transfer in the partnership agreement. Then add the property to
the balance sheet as an asset.

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d. Who Owns the Property?

i. Property acquired by a partnership is property of the partnership and not of the
partners individually, see RUPA §203.
e. Timing of Property Acquisition:
i. Every transfer that happens from the date of formation is partnership property IF
it is generated from the partnership. If you acquire something with partnership
property, then the assets that stem from it are partnership property. RUPA
§204(c).
ii. You have to look at the formation date of the partnership as well as whose cash is
paying for it and whose name it is under. Even if the requirements of RUPA
§204(a) are not met, it can be partnership property if it was bought with
partnership assets.
6. Agency and Partnership Decision Making
a. Each Partner as Agent (RUPA §301):
i. Agent—A partner is an agent of the partnership.
ii. General Rule—Partner has the power to bind the partnership if his act was
1. Expressly agreed upon by the partners;
2. In the ordinary course of the partnership business;
3. Business of the kind carried on by the partnership; or
4. Course of conduct of similar partnerships.
iii. Exception—Unless the partner did not have authority and person with whom the
partner was dealing knew or had received a notification that the partner lacked
authority.
iv. NOTE—By being a partner, you have apparent authority automatically to act on
behalf of the partnership in the ordinary course of the partnership business.
v. What if the Partner’s Authority is Outside of the Partnership Business? There is
no apparent authority; partnership would only be liable if they ratified the
contract or had given express authority to the partner.
b. Operation of Partnership – Default Provisions RUPA §401
i. A person may become a partner only with the consent of all of the partners
ii. Each partner has equal rights in the management and conduct of the partnership
business (or you can change this by altering it in the partnership agreement).
iii. Differences arising in ordinary course of business may be resolved by majority
vote.
iv. Differences arising from something outside the ordinary course of business may
be resolved by unanimous agreement.
v. Amendment of the partnership agreement may be done only by unanimous
agreement/consent of the partners.
c. Partnership Agreement Governs (RUPA §103): The partnership agreement governs
(unless it violates subsection b). If the partnership agreement is silent regarding an issue,
RUPA will be used to fill in the blanks.
7. Recourse for Partners Against Partner (RUPA §405(b))
a. A partnership may maintain an action against a partner for a breach of the partnership
agreement, or for the violation of a duty to the partnership, causing harm to the
partnership.
b. A partner may maintain an action against the partnership or another partner for legal or
equitable relief, with or without an accounting as to partnership business to:
i. Enforce the partner’s rights under the partnership agreement;
ii. Enforce the partner’s rights under RUPA; or
iii. Enforce the rights and otherwise protect the interests of the partner, including
rights and interests arising independently of the partnership relationship.

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c. An example of where recourse is used is where a partner knows he doesn’t have authority
to act, but he acts anyway and because the third party thinks the partner has authority
(apparent), now the partnership is bound. The partners will have recourse against the
partner who acted without authorization.
8. Fiduciary Duties
a. What are fiduciary duties?
i. Fiduciary duties were developed by judges, as part of the common law.
ii. RUPA attempts to codify these fiduciary duties and then allows the partners to
modify them in their partnership agreements (to a certain extent).
iii. These duties are owed to both the partners and the partnership itself.
b. What duties do partners owe each other and to the partnership?
i. Duty of Loyalty—RUPA §404(b) – Partners owe a duty of loyalty to one
another. A partner’s duty of loyalty is limited to the following:
1. To account to the partnership and hold for it as trustee any property,
profit, or benefit derived by the partner in the conduct and winding up of
the partnership business or derived from a use by the partner of
partnership property, including the appropriation of a partnership
opportunity;
2. To refrain from dealing with the partnership on behalf of a party having
an interest adverse to the partnership; and
a. Example: We’d like to sue your law firm. Will you represent
us? No, you cannot do this.
3. To refrain from competing with the partnership.
ii. Duty of Care—RUPA §404(c) – Partners owe a duty of care to one another.
1. A partner’s duty of care to the partnership and other partners in the
conduct and winding up of the partnership business is limited to
refraining from engaging in grossly negligent or reckless conduct,
intentional misconduct, or a knowing violation of law.
iii. Duty of Good Faith and Fair Dealing—RUPA §404(d) – A partner owes the
partnership a duty of good faith and fair dealing.
1. A partner shall discharge the duties consistently with the obligation of
good faith and fair dealing.
c. How are opportunities to the partnership handled?
i. If there is a conflict, the partner MUST disclose as long as it is within the scope
of the partnership. Failure to do so is a breach of the duty of loyalty.
ii. If a partner learned of an opportunity because of his position (i.e. being the face
of the partnership), he must disclose to the partnership and not take advantage of
the opportunity for himself. To do so would be a breach of the duty of loyalty.
d. Which of the duties can be eliminated completely? Which can be modified but not
eliminated? How can they be modified?
i. Duty of Loyalty
1. The duty of loyalty may not be eliminated. RUPA §103(b)(3).
2. HOWEVER, the partnership agreement may identify specific types or
categories of activities that don’t violate the duty of loyalty, as long as it
is not manifestly unreasonable; or, after full agreement by all, may
authorize or ratify a specific act or transaction that would ordinarily
violate the duty of loyalty.
ii. Duty of Care
1. The duty of care may not be eliminated, but it may be reduced.
2. The duty of care may not be unreasonably reduced. RUPA §103(b)(4).

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3. The comments basically say that you cannot eliminate intentional

misconduct from the duty of care.
4. The partnership agreement could provide that partners are not liable for
any actions which were entered into in good faith.
iii. Duty of Good Faith and Fair Dealing
1. The duty of good faith and fair dealing may not be eliminated, but the
partnership can prescribe standards by which the performance of the
obligation is to be measured, if the standards are not manifestly
unreasonable. RUPA §103(b)(5).
9. Are “joint ventures” partnerships?
a. Yes. Joint adventurers, like copartners, owe to one another, while the enterprise
continues, the duty of finest loyalty. A trustee is held to something stricter than the
morals of the marketplace. Not honesty alone, but the punctilio of an honor the most
sensitive, is the standard of behavior.
i. Punctilio of an honor: Unbending, undivided loyalty to fellow partners and
partnership itself.
b. Meinhard v. Salmon: Salmon and Meinhard entered into a partnership (per
majority)/venture (per dissent) together, where Salmon was the managing partner and
Meinhard was a silent partner. Right before the lease ended, Salmon made plans to enter
into a bigger deal that dealt with the current leased property, but he left Meinhard out of
it. The court found that Salmon owed Meinhard the duty of finest loyalty (since he was
in control) and should have disclosed this information to Meinhard. Salmon breached the
duty of loyalty under this partnership.
i. Note: Even if Salmon had found out about the new deal through his own
research, he may still have breached the duty of loyalty because he cannot
compete with the partnership.
10. Who is Liable for What to Whom?
a. Liability of the Partnership:
i. Under RUPA §201, a partnership is a legal person – an entity. As such, a
partnership can be held liable and can sue or be sued.
ii. A third party can sue the partnership for the contracts entered by its agents and
for the torts committed by its agents.
iii. A partnership is liable for acts of a partner acting in the ordinary course of
business or with authority of partnership.
iv. Also, a partner can sue the partnership to enforce her rights under RUPA or
under the partnership agreement. See RUPA §405(b).
b. Liability of the Partners:
i. Under RUPA: Partners are jointly and severally liable for all obligations of the
partnership. See RUPA §§ 305, 306, and 307.
ii. Step One – RUPA §306: Must first have liability.
1. There is joint and several liability for the partners unless otherwise
agreed upon.
2. A person admitted as a partner into an existing partnership is not
personally liable for any partnership obligation incurred before the
person’s admission as a partner. However, a partner joining a
partnership is liable for pre-existing debts only to the extent of his
contribution.
3. An obligation of a partnership incurred while the partnership is a limited
liability partnership, whether arising in contract, tort, or otherwise, is
solely the obligation of the partnership. A partner is not personally

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liable, directly or indirectly, by way of contribution or otherwise, for

such an obligation (even if the partnership agreement says otherwise).
iii. Under RUPA, why is it smart to sue everyone? §307(c) – a judgment against a
partnership is not by itself a judgment against a partner. There has to also be a
judgment against the partner to dip into the partner’s own assets. So, sue
everyone because you cannot collect from the particular person unless you have a
judgment against them.
iv. Step 2 – RUPA §307 THE EXHAUSTION RULE– Even if you have a
judgment against a partner, you have to exhaust the partnership first: You
can’t collect from partner until you go against the partnership first. If there are
insufficient partnership assets, the creditor can attempt to satisfy the judgment
from the assets of a partner WHERE the partner is personally liable for the claim
under §306 AND:
1. §307(d)(1): There are insufficient partnership assets to satisfy the
judgment; or
2. (d)(2): The partnership is a debtor in bankruptcy; or
3. (d)(3): If we have personal liability for the partner and the partner agrees
that the third party can pursue his assets before the partnership’s assets,
then this is okay; or
4. (d)(4): If the court grants permission to plaintiff to go after the partner
first, then that’s okay; or
5. (d)(5): If plaintiff can go after the partner by law or contract
independent of the existence of the partnership, then that is okay. If the
partner is the tortfeasor, the partner has liability outside of the
partnership. Therefore, plaintiff can go directly after this partner’s assets
before the partnership’s assets.
6. NOTE: Liability exposure cannot be restricted by the partnership
agreement because that is the right of a third party.
v. Under UPA: Under §15, partners are jointly (but not severally) liable in contract
but jointly and severally liable in tort.
vi. Joint Liability: Plaintiff must sue ALL the partners together in a single suit.
vii. Joint and Several Liability: Plaintiff is free to sue one or more of the partners.
In other words, plaintiff can recover the partnership’s entire liability to him from
just one partner (or from all).
viii. Reimbursement by Partnership (RUPA §401(c)): Where creditor collects
from partner (even the tortfeasor), the partnership shall reimburse the partner for
the payments made and indemnify the partner for liabilities incurred in the
ordinary course of the business (duty of care) UNLESS the partner was grossly
negligent.
11. Tax Liability—Partnerships don’t have a separate legal entity for taxes; the taxes are incurred by
the partners.
a. The partnership usually gets its money from one of four sources: The existing
owners; Outside lenders; New investors (i.e. additional owners); and, Earnings from
business operations.
i. Existing Owners (Capital Contributions from Partners)
1. RUPA refers to a partner’s investment in the partnership as a
contribution of capital.
2. There is no statutory requirement that partners make initial or
additional capital contributions. Partners themselves agree on capital
contributions – by whom, how much, and when?

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3. It is common for the partnership agreement to contain provisions

requiring initial and additional capital contributions from partners.
Properly drafted, such provisions will state –
a. The vote or events that trigger the obligation to contribute;
b. The amount of each partner’s contribution obligation;
c. The time in which to make the additional contribution; and
d. The consequences of a failure to contribute.
4. Can a partner make a loan to the partnership?
a. RUPA §404(f): “A partner may lend money and transact other
business with the partnership.” If the partnership is borrowing
money, the owners have to act as guarantors (even if they don’t
sign an agreement).
ii. Outside Lenders
1. In RUPA states, lenders to partnerships are likely to request guarantees
from individual partners.
iii. Additional Owners (i.e., Investors):
1. Raising money by bringing in new investors as new partners raises
two legal questions
a. Question: Do all existing partners have to approve any new
partner?
i. Answer: RUPA §401(i) requires the consent of all
existing partners before a person may become a partner,
UNLESS the partnership agreement provides otherwise.
b. Question: Is the new partner personally liable for all of the
partnership’s existing debts?
i. Answer: Under RUPA §306(b), a new partner is not
personally liable for partnership obligations “incurred
before the person’s admission as a partner.” But NOTE
that if he contributed money to the partnership, it has
become part of the partnership’s assets and can be lost.
iv. Earnings from Business Operations
1. Existing partners fund the growth of their business not only by deciding
to put new money into the partnership, but also by deciding not to take
money out of the partnership.
2. In deciding whether to retain earnings, the partnership should evaluate
whether the partnership can earn a higher return than the partners could
earn individually if the money were distributed to them.
3. Earnings should be distributed UNLESS the partnership has some
lucrative use for the funds.
b. How Do the Partners Make Money
i. Salary
1. RUPA provisions on salaries are rarely applicable.
2. Partners/owners do NOT have a RIGHT to a salary [RUPA 401(h)]
except for reasonable compensation for services rendered in winding up
the business of the partners, UNLESS the partnership agreement says
otherwise.
3. If a partner is receiving a salary (because the partnership agreement
allows for it) and wants an increase, it cannot be rendered unless there is
a unanimous agreement to change the partnership agreement.
ii. Profits

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1. The law with respect to partnership profits is found primarily in the

partnership agreement and other contracts and laws.
2. The only RUPA provision that expressly deals with partners’ rights to
partnership profits is §401(b): “Each partner is entitled to an equal share
of the partnership profits and is chargeable with a share of the
partnership losses in proportion to the partner’s share of the profits.”
3. Unless the partnership agreement provides otherwise! RUPA §103
allows changes in the default method through the partnership agreement.
4. Who decides if a distribution of profits should be made? The partners
do by majority vote where the matter is in the ordinary course of
business. RUPA §401(j).
iii. Sale of Ownership Interest to a Third Party
1. If you are a purchaser of a partnership interest, transferability of a
partnership interest is limited because you can get the money, BUT you
don’t have the ability to make any decisions.
2. RUPA §502: “The only transferable interest of a partner in the
partnership is the partner’s share of profits and losses of the partnership
and the partner’s right to receive distributions.” But there is no right to
management. You have no say as to when distribution will occur.
3. RUPA §401(i): “A person may become a partner only with the consent
of all of the partners.”
a. No person can become a partner without the consent of all
partners. Thus –
i. “Buyer”/Assignee gets:
1. Profits the seller is entitled to;
2. On dissolution, right to selling partner’s interest.
ii. “Seller”/Assignor keeps:
1. All other rights and duties. RUPA §503(d).
Selling partner still hangs onto the managing
function and also hangs onto the liabilities. The
only thing selling partner loses is the right to
profits.
2. Policy Reason: If you are operating a
partnership and you leave, the person leaving
shouldn’t be able to decide who will take over in
making decisions for them.
3. NOTE: If all the partners agree (consent) to the
sale of the entire interest, then the departing
partner can get rid of it all and not be liable
anymore.
4. When selling to a third party, there are tax issues which makes selling it
to a third party a challenge.
iv. Buy-Sell Agreements (Sale of Ownership Interest Back to the Partnership)
1. What is it? Partner sells his share of the partnership back to the
partnership itself upon the certain event stated within the agreement;
partner may make money from this.
2. Any buy-sell agreement should answer the following questions
a. Are the other partners or the partnership obligated to buy or do
they instead have the option to buy?
b. What events trigger (i.e., death, divorce) this obligation or
option?

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c. How is the selling partner’s interest to be valued?

d. What is the method of funding the payment?
3. Withdrawal of a Partner (Dissociation)
a. Even if there is no buy-sell agreement, a partner has the power to
compel the partnership to pay for her partnership interest by
withdrawing from the partnership.
b. Under UPA, this would force the partnership to dissolve, wind-
up, and terminate.
c. Under RUPA, however, not all withdrawals will make the
partnership dissolve, wind-up, and terminate.
d. If dissolution does not occur, the partnership can buyout the
departing partner and continue operating as a partnership.
12. Withdrawal of a Partner—When a partner decides to leave (dissociate) a partnership, you must
look at how it affects the partnership and the partners.
a. Dissociation: Dissociation occurs when a partner decides to withdraw from a partnership.
i. Power to Dissociate RUPA §§ 602(a), 601: A partner always has the power to
dissociate (withdraw).
ii. Effect on Partnership
1. Under UPA, dissociation would force the partnership to dissolve, wind-
up, and terminate.
2. Under RUPA, however, not all withdrawals will make the partnership
dissolve, wind-up, and terminate.
a. RUPA §801: Dissociation MAY cause dissolution of the
partnership.
b. RUPA §701(a), (b): If dissociation does not cause dissolution of
the partnership, the dissociated partner is entitled to receive the
buyout price.
b. Step One: Determine what type of partnership exists.
i. Partnership At Will: It ends at will.
ii. Partnership for a Definite Term: It’s fixed for a number of years.
iii. Partnership for a Particular Undertaking: It was created for the purpose of
completing a particular undertaking. It must be capable of accomplishment at
some time, although the exact time may be unknown. If the undertaking can
continue indefinitely, then it is not for a definite undertaking (i.e., leasing real
property).
c. Step Two: Determine if dissociation has occurred by looking at how and why the partner
left.
i. Events Causing Partner’s Dissociation (RUPA §601): A partner is dissociated
from a partnership upon the occurrence of any of the following items:
1. Express dissociation (withdrawal);
2. An event agreed to in a partnership agreement occurs triggering the
dissociation;
3. The partner’s expulsion pursuant to the partnership agreement;
4. Partner’s expulsion by the unanimous vote of the other partners;
5. Court says you can kick out a partner;
6. Partner is going through bankruptcy;
7. Death of partner, appointment of a guardian for partner, or if partner has
been judicially determined unable to make partnership decisions;
8. If a partner is a trust or is acting as a partner by virtue of being a trustee
of a trust, distribution of the trust’s entire transferable interest in the

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partnership, but not merely by reason of substitution of a successor

trustee;
9. If a partner is an estate or is acting as a partner by virtue of being a
personal representative of an estate, distribution of the estate’s entire
transferable interest in the partnership, but not merely by reason of the
substitution of a successor personal representative; or
10. Termination of a partner who is not an individual, partnership,
corporation, trust, or estate.
d. Step Three: If dissociation has occurred, RUPA provides that a partner can leave and
still get paid for his interest in the partnership. BUT, you must look to see if the partner’s
dissociation was rightful or wrongful to determine how much and when the partner will
get paid.
i. Wrongful Dissociation
1. Dissociation is wrongful IF:
a. It is in violation of the partnership agreement, or
i. This is the only time dissociation from a “partnership at
will” will be wrongful. Otherwise, a partner is a
“partnership at will” can leave at any time without it
being wrongful.
b. The partnership is for a definite term or particular undertaking,
and it occurs before the expiration of the partnership term or
before the undertaking is completed. RUPA §602(b)(2).
2. Consequences for wrongful dissociation: RUPA §§ 701(b), (c), (h),
602(c).
a. Generally: The partner is subject to damages. The buyout price
is reduced for damages.
b. Partnership for a Term or Particular Undertaking: Partner will
not get paid until a later date; i.e., payment may be delayed until
the term or undertaking is completed. RUPA §701(h).
i. When a partner wrongfully dissociates, the partnership
must begin liquidation.
ii. Distribution is after the wind-up process.
c. Exception to When Partner Will Receive Payment for a
Partnership for a Term or Particular Undertaking: If the partner
can establish to the satisfaction of the court that if partner got
paid earlier, it won’t cause hardship to the business of the
partnership, then partner may receive payment before the end of
the term or undertaking. RUPA §701(h).
d. What about when a Partnership at Will receives payment?
ii. Rightful Dissociation
1. Dissociation is rightful IF:
a. Term or Undertaking: Partner left upon completion.
b. Partnership At Will: Partner can leave at any time without it
being wrongful UNLESS partnership agreement says otherwise.
2. Consequences for rightful dissociation: Partner gets either:
a. Full buyout amount or
b. Full winding up/liquidated amount.
13. Two Options When a Partners Dies or Otherwise Dissociates—The analysis must be done in
order (first, dissolution and then, buyout if dissolution is not required).
a. Cause the partnership to dissolve, liquidate/wind-up, and terminate; or
b. Continue the partnership, but buyout deceased/departing partner’s interest.

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i. RUPA §§ 601 and 803 provide that a buyout is triggered ONLY IF dissolution is
not triggered. If the partnership is not dissolved, the partnership may continue
and the leaving partner can be bought out.
c. DISSOLUTION
i. Terminology
1. Dissolution: Partners cease doing business together. This is the starting
process for winding up the partnership.
2. Winding Up: After dissolution, this is the process of getting together all
the assets, wrapping up the current affairs of the partnership, paying off
the creditors, and distributing the remaining assets.
3. Termination: The partnership is terminated after all partnership affairs
are wound up; the end of the partnership.
ii. RUPA §801 – When Does Dissociation Cause Dissolution of a Partnership?
Has dissolution been triggered?
1. A partnership is dissolved, and its business must be wound up, only upon
the occurrence of any of the following events:
a. In a partnership at will, or
i. Dissociation in a partnership at will automatically
triggers dissolution. RUPA §801(1).
1. General Rule: Since there is automatic
dissolution where someone dissociates in a
partnership at will, there will never be a buyout.
2. Exception: Dissolution won’t be automatic if
the partners (including the one that is leaving)
agree otherwise.
b. In a partnership for a definite term or particular undertaking, IF
at least half of the remaining partners express a will to wind up
the partnership WITHIN 90 days after the partner’s dissociation,
or
i. Why not just carry out the term or undertaking? If a key
partner dies or leaves, the other partners should be able
to decide if the partnership should go on. If you have
one rainmaker and five pencils, how will the pencils
carry on?
c. An event agreed to in the partnership agreement resulting in the
winding up of the partnership business; or
i. For instance: Dissolution is triggered when a term or
undertaking is completed.
d. An event that makes it unlawful for all or substantially all of the
business of the partnership to be continued, but a cure of
illegality within 90 days after notice to the partnership of the
event is effective retroactively to the date of the event, or
e. On application by a partner, a judicial determination that:
i. The economic purpose of the partnership is likely to be
unreasonably frustrated OR
ii. Another partner has engaged in conduct that makes it
unreasonably practicable to carry on the business in the
partnership with that partner OR
iii. Conforming to the partnership agreement is not
reasonably practicable.

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f. On application by a transferee of a partner’s transferable

interest, a judicial determination that it is equitable to wind up
the partnership business:
i. After the expiration of the term or completion of the
undertaking, if the partnership as for a definite term or
particular undertaking at the time of the transfer or entry
of the charging order that gave rise to the transfer, OR
ii. At any time, if the partnership was a partnership at will
at the time of the transfer or entry of the charging order
that gave rise to the transfer.
2. NOTE (Avoiding Winding Up and Termination): If dissolution has
been triggered BUT winding up has NOT begun, the partnership can still
continue if ALL of the partners (including the one that is leaving) agree
to a buyout rather than dissolution.
3. What happens if the partnership term is over and dissolution does
not occur? It becomes a partnership at will.
4. If dissolution is NOT triggered when someone leaves, then the
alternative is a buyout.
iii. Rules For When Dissolution is Triggered
1. General Rule for Partnership at Will: The partnership will not
continue; it will be dissolved, wound up, and terminated. There will be
no buyout.
2. Exceptions for Partnership at Will: The partnership is NOT dissolved
if
a. The partnership agreement states otherwise, OR
b. Pursuant to §802, all partners agree (including departing partner)
that partnership will continue.
3. General Rule for Partnership for a Term or Undertaking: When a
partner leaves, it does NOT trigger dissolution; instead, it will trigger a
buyout.
4. Exceptions for Partnership for a Term or Undertaking: Dissolution
IS triggered if
a. The term or undertaking is completed OR
b. All partners agree otherwise OR
c. There was a wrongful dissociation or dissociation under §601(6)-
(10) and half the partners agree within 90 days to send the
partnership into dissolution.
iv. Winding Up (RUPA 401, 807)
1. Order for Winding Up:
a. Liquidate the partnership assets.
b. Pay the creditors (including partners who are creditors).
c. Repay capital contribution of partners – partners are paid the
amount they are owed based on how much they put in (according
to their accounts).
d. Remainder distributed based on how share profits – the rest is
distributed to the partners according to their profit interest. The
agreement can state otherwise on how to distribute the profit
amount.
2. Partnership creditors (a partner who lent a loan to the partnership) are
treated the same as any other creditor.

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3. If the partnership has no assets, the inside and outside creditors can
collect the unpaid balance of their claims from the partners, equally: “A
partner shall contribute to the partnership an amount equal to any excess
of the charges over the credits in the partner’s account but excluding
from the calculation any charges attributable to an obligation for which a
partner is not personally liable under §306.” RUPA §807(b).
4. Unless partners agree to the contrary
a. They share responsibility not only for the losses from operation
of the partnership business but also for partners’ losses from
investments in the partnership. RUPA §401(b);
b. The amount of each partner’s loss from her investment in the
partnership is determined from her partnership account, a
bookkeeping device, which keeps track of how much a partner
puts into the partnership, how much she has taken out of the
partnership, and her share of the partnership’s profits and losses.
RUPA §§401(a), 807(a)-(b);
c. When the partnership is dissolved, the partnership is legally
obligated to pay each partner an amount measured by the balance
in her partnership account. §807(b). Summarizing §401, the
amount in each partner’s account will be:
i. The value of each partner’s investment in the partnership
of money or property, but no credit for the value of a
partner’s labor;
ii. Minus any distributions to the partner – remember,
profits can be either retained or disbursed;
iii. Plus an equal share of whatever the value remains in the
partnership after paying both creditors and the above
amounts. If there are insufficient partnership funds to
cover the amounts above, this loss will be divided
equally among the partners’ accounts.
d. It is possible that, at the time of dissolution, a partner will have a
negative balance in his account. For example, this could occur if
a partner, relative to the other partners, has contributed little
property or money, but has received relatively large
distributions, and the partnership has suffered large losses. Such
a partner will have to contribute additional funds to the
partnership in the amount of the negative balance. §807(b).
Only this will ensure that the other partners – such as those who
received no distribution – are dealt with fairly.
v. Termination—the partnership is terminate when ADD FROM SLIDES
d. BUYOUT
i. When will the partnership buyout the departing partner? If dissolution is
not triggered, then the partnership or partners will buyout the departing partner.
ii. Buyout Amount: The buyout price of a dissociated partnership interest is the
amount that would have been distributable to that partner after winding up the
partnership business if sold or liquidated on the date of dissociation. RUPA
§701(b).
1. It is the GREATER OF the liquidation value OR the value as a going
concern, i.e., the value of what he owns on the date he leaves.
a. Liquidation is the value of the assets itself.

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b. Value as a going concern would include other things like good

will.
2. BUT damages for wrongful dissociation may offset the price that would
have been distributed to the partner. RUPA §701(c).
14. Liability After Dissociation
a. Liability After Dissociation – Dissociated Partner
i. If there is no dissolution or winding up, dissociated partner remains liable for
partnership transaction after withdrawal IF:
1. Less that two years have passed since dissociation,
2. Third party reasonably believed that the dissociated partner was a partner
and did not have notice,
3. Fewer than 90 days have passed since the filing of a statement of
dissociation, AND
4. If it’s a real property transaction, a copy of dissociation has not been
filed in the office of recording transfers of that real property.
b. Liability After Dissociation – Partnership
i. A dissociated partner can bind the partnership IF
1. The act would have bound the partnership before the dissociation,
2. Less than two years have passed since dissociation,
3. Third party reasonably believed that the dissociated partner was a partner
and did not have notice,
4. Fewer than 90 days have passed since the filing of a statement of
dissociation, and
5. If it’s a real property transaction, a copy of dissociation has not been
filed in the office of recording transfers of that real property.
c. Freeze Out
i. A freeze out occurs where holders of the majority interest force a minority owner
to sell or otherwise give up her interest.
ii. Freeze outs usually happen more often in corporations, but they do from time to
time occur in partnerships as well. It’s just harder to freeze out someone in a
partnership because the partner can walk away from the partnership.
iii. Page v. Page: P wished to terminate the partnership only after it became
profitable. The issue was whether this was a partnership at will or partnership for
a term (in order to determine if P’s actions were wrongful). It was a partnership
at will, which sends the partnership into dissolution. A partner at will is not
bound to remain in a partnership, regardless of whether the business is profitable
or unprofitable. A partner may not, however, by use of adverse pressure “freeze
out” a co-partner and appropriate the business to his own use. A partner may not
dissolve a partnership to gain the benefits of the business for himself, unless he
fully compensates his co-partner for his share of the prospective business
opportunity.

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_____________________________________________________________________________________

CORPORATION LAW
1. What is a Corporation?
a. A corporation is whatever the relevant state law says it is. Corporations are creations of
state legislature.
b. A corporation is a separate legal entity.
c. A corporation’s owners (called shareholders) are generally NOT personally liable for the
debts of the corporation.
2. What are the Four Sources of Corporation Law?
a. State Statute (MBCA)
i. Each state has its own general corporation statute. More than half of the states
have modeled theirs after the MBCA. In addition to the MBCA, Delaware
corporation law is centrally important.
b. Articles of Incorporation / Bylaws
i. A corporation’s articles of incorporation or by-laws are in important source of
corporate law. On some matters, the articles and bylaws will be the most
important sources of corporate law.
c. Case Law
i. Cases interpret and apply the provisions in corporate statutes and in corporation’s
articles and bylaws.
ii. Cases fill gaps in the law-resolve problems not covered or not fully covered by
statutes, articles or bylaws.
1. Most important judicial gap filing involves the fiduciary duties of
directors, officers and shareholders
d. Federal Securities Law
i. There is no general federal corporation statute, important federal statutes that
govern certain corporate activities.
3. How is a Corporation Formed?
a. To form a corporation, you MUST file the articles of incorporation with the state.
i. A corporation does not exist until the articles of incorporation are properly
executed and filed with the appropriate state agent or agency.
ii. The articles of incorporation are a public document (somewhat like a contract
between the corporation and the state).
iii. In order to change the articles of incorporation, you have to get approval from
both the shareholders and the board of directors.
iv. The articles of incorporation always trump the bylaws.
b. Most corporations also file bylaws.
i. These are a more formal and secondary document.
ii. The bylaws are private documents (somewhat like a contract between the
shareholders).
iii. Bylaws are much easier to change than the articles of incorporation because the
board of directors all have the power to change the bylaws.
iv. Bylaws do NOT have to be filed with the state.
4. What is the difference between authorized and outstanding shares?
a. Authorized Shares—This number represents the number of shares that can or may be
authorized by the corporation.
b. Issued and Outstanding Shares—These are the shares that have actually been issued by
the corporation.

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5. What types of Stock can a Corporation Issue? Both represent an equity interest in the corp.
a. Preferred Stock—Preferred stock is given some sort of preferential treatment.
i. Preferred shareholders are usually given dividend preference; rights upon
liquidation
b. Common Stock—This class of stock does not enjoy special treatment.
i. If the articles of incorporation are silent, there would only be one class of shares,
common stock.
6. What is Par Value?
a. The minimum price for which a corporation can issue its shares.
i. State corporation statutes that provide for par value stock also provide for
keeping two separate funds or accounts:
1. Stated Capital Account—This account includes the aggregate par value
of all issued shares of par value stock.
a. Ex. If a corporation issues 50 shares of $1,000 par value stock,
then its stated capital would be $50,000.
i. A corporation cannot sell their stock for less than the par
value. However, a shareholder can sell their stock for
whatever price they want.
2. Capital Surplus Account: If a corporation has funds for its issuance in
excess of par, the excess amount goes into the capital surplus account.
a. Ex. If a corporation received $99,000 for its issuance of 50
shares of $1,000 stock, its stated capital would be $50,000 and
its capital surplus would be $49,000.
3. Dividends or Distributions—may only be made out of “surplus.”
7. Consideration for Stock
a. The board of directors can authorize shares to be issued for consideration consisting of
any tangible or intangible property or benefit to the corporation.
i. Ex. Cash, promissory notes, services performed, contracts for services to be
performed, or other securities of the corporation.
1. The board of directors must determine that the consideration received for
the shares is adequate.
8. State of Incorporation
a. By incorporating in a particular state, the laws of that state will then become the default
rules that govern the internal affairs of the corporation.
i. If you operate in another jurisdiction, then you can also be held to the laws of
that jurisdiction.
1. Particularly if you commit a tort in that jurisdiction.
9. Contracting Pre-Incorporation
a. In corporate law, a promoter is someone acting on behalf of a corporation that is not yet
formed.
i. A promoter is generally held liable for any liabilities created when they know
that the corporation has not yet filed any articles of incorporation with the state.
In other words, all persons purporting to act on behalf of a corporation not yet
formed are jointly and severally liable for all liabilities created while so acting.
1. The corporation will only be liable if it takes some action to adopt the
promoter’s contract (like ratification or estoppel).
2. Make sure you go through an agency analysis to determine what type of
authority the promoter had or didn’t have.
10. Shareholder Liability
a. General Rule: Shareholders are not personally liable for the debts of the corporation.
However, there are two judicial exceptions to this rule.

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b. Exceptions
i. Piercing the Corporate Veil—ONLY GRAB THE OFFENDING
SHAREHOLDER(S). The decision to disregard the corporate entity may not rest
on a single factor, but must involve a number of factors. In addition, it must
present an element of injustice or fundamental unfairness. No single factor is
important – look at all factors and decide if the corporate veil should be pierced –
(S.N.U.F.F.I.N.A.)
1. Siphoning of corporate funds;
2. Non-payment of dividends;
3. Undercapitalization;
a. The shareholders do not initially fund or maintain the
corporation. Idea of not providing enough capital, property, or
cash for the corporation to be able to stand on its own.
4. Failure to observe corporate formalities;
5. The fact that the corporation is merely a façade for the operations of the
dominant stockholders;
6. Insolvency of the debtor corporation at the time of incorporation;
7. Non-functioning of other officers or directors;
8. Absence of corporate records.
ii. Enterprise Liability—This is when a group of owners have separated out a
single business into a bunch of separate corporations. You want to go after the
assets some of the brother/sister corporations have (not after the owners!) All of
the other corporations are considered as a single business, and the judgment
creditor can go after any of them.
11. What does Ultra Vires Mean?
a. Ultra vires—An action outside the proper authority or purposes of a corporation or
corporate officer. Latin for “beyond the power.”
i. Anything that is illegal is ultra vires.
b. Intra vires—pertains to an action within the proper authority or stated purposes of a
corporation or corporate officer.
i. Black’s Law dictionary defines intra vires as of or referring to an action taken
within a corporation’s or person’s scope of authority.
12. Functions and Powers of the Board of Directors
a. Players involved in a Corporation: Football team analogy:
i. Owners = Shareholders
1. The shareholders elect the board of directors and vote on major corporate
actions or fundamental changes.
a. They are NOT agents.
ii. Coaches = Board of Directors
1. The directors manage the business, set policy, and select other officers
and other agents. Essentially, the directors make the business decisions.
a. They are (like) principals, NOT agents.
iii. Players = Officers / Agents
1. The officers / agents execute the board’s decisions and manage the day-
to-day operations of the business. They have the power to bind the
principal upon either actual or apparent authority.
a. Officers are agents of the corporation.
iv. Team = Principal
13. Requirements for Board of Director Action
a. Notice of Meeting MBCA § 8.22
i. Regular Meeting: Regular meetings do not require notice.

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ii. Special Meeting: A special meeting requires at least 2 days of notice prior to the
meeting (unless the articles of incorporation provide for a longer or shorter time).
1. The notice requires the time, date, and place of the meeting. The purpose
of the meeting is NOT required in the notice.
2. The notice can be either written or oral (if oral is reasonable).
b. Waiver of Notice MBCA § 8.23
i. A director may waive any notice requirement. Typically, a waiver must be in
writing and filed with the minutes or corporate records.
1. However, if a director shows up at a meeting or participates in a meeting
which he wasn’t given notice of, this could also constitute a waiver
unless the director promptly objects to the meeting.
c. Quorum and Voting MBCA § 8.24
i. This means a majority of the directors.
1. Ex. If there are 15 directors, quorum would be 8.
a. If the bylaws say that there have to be 15 directors, and three of
them die, quorum would still be 8 because the bylaws have fixed
the number of directors at 15.
b. To be present at a meeting, all directors must be able to
simultaneously hear each other during the meeting.
i. If a director leaves during a meeting, the board cannot
take action if the number is reduced to less than quorum.
c. A majority of those present must approve a particular proposal to
constitute valid board action (if quorum is 8, need 5 votes)
i. A board member CANNOT be present by proxy (that
only applies to shareholder voting).
14. Requirements for SHAREHOLDER Voting
a. Proxy
i. A shareholder may vote his shares in person, or by proxy.
1. A proxy is generally revocable, but you can make it irrevocable if you
follow these three requirements (W.C.I.)
a. The proxy is in writing;
b. The proxy is coupled with an interest; and
c. The proxy states that it is irrevocable.
b. Quorum
i. Shareholder voting differs from director voting because it only requires more yes
votes than no votes in order to constitute shareholder action.
c. Record Date
i. This date determines who is entitled to vote at a meeting. Record date may not be
more than 70 days before a meeting. However, it can be less if all the
shareholders waive their right to notice.
d. Cumulative Voting: You can accumulate your votes and split them up any way you
want. Applies to the election of directors. If a corporation wants to allow cumulative
voting it MUST say so in the articles of incorporation. If the articles of incorporation are
silent, the default is straight voting.
i. Formula for Cumulative Voting
1. [(NxS)/(D+1)] + “1” = by adding the “1” this breaks the tie.
a. N = the number of directors the shareholder wants to elect.
b. S = total number of shares voting.
c. D = total number of directors to be chosen at the election.
2. Example: we want to elect 9 directors. How many do you think Propp
wants to elect, 4.

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a. 4 x100/9+1 = 400/10 = 40 shares to tie and you need 41 to win.

Propp only has 30 shares, he shot too high.
15. What are the Attributes of a “Close Corporation”?
a. A closely held corporation is one in which…
i. The stock is held by a small number of shareholders;
ii. There is no ready market for the corporate stock; and
iii. There is substantial majority shareholder participation in the management,
direction, and operation of the corporation.
16. Salaries and Distributions in Close Corporations
a. Under the MBCA, a distribution is proper if the corporation is not insolvent and as long
as the distribution does not render the corporation insolvent.
i. There is no right to a salary.
b. What is a Dividend?
i. A dividend is a special type of distribution, a payment to shareholders by the
corporation out of its current or retained earnings in proportion to the number of
shares owned by the shareholder.
1. If director allows illegal dividends, directors would be personally liable
for the amount.
17. What are Buy-Sell Agreements?
a. A contract that requires the corporation or majority shareholder to purchase shares in
specified situations at a specified price. A good buy-sell agreement will spell out at least
three main factors: (T.P.M.)
i. Trigger events (e.g., person retires or passes away);
ii. Purchase price mechanism (e.g., payout set forth in life insurance policy); and
iii. Method or source of payment (e.g., life insurance policy).
18. Judicial Dissolution in a Close Corporation
a. Judicial dissolution can be triggered due to illegality, deadlock, or oppression.
b. There are four different tests to determine if a minority shareholder has been oppressed:
i. The MBCA Rule: A shareholder may obtain dissolution only if he shows one of
four things: (D.O.S.W.)
1. Director Deadlock: That the directors are deadlocked in the management
of the corporation’s affairs, in a way that is causing injury to the
corporation or its shareholders; OR
2. Oppression: That the directors or those controlling the corporation have
acted in a manner that is illegal, oppressive, or fraudulent; OR
3. Shareholder Deadlock: That the shareholders are deadlocked in voting
power, and have failed to elect successor directors “for a period that
includes at least two consecutive annual meeting dates”; OR
4. Waste: That the corporation’s assets are being misapplied or wasted.
a. Under the MBCA Rule, the corporation can elect to purchase the
shares owned by the controlling shareholder for fair value in
lieu of dissolution.
i. Note that the MBCA Rule does NOT define oppression.
ii. The New York Rule – The Reasonable Expectation Test: A statute exists but it
does NOT define oppression. Under this test you have to find that the majority
shareholder’s actions defeated the reasonable expectations of the minority
shareholders. This requires two steps:
1. At the time the investment was made, the minority shareholder had a
reasonable expectation to keep his job; and

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a. Objectively viewed, the expectations were reasonable under the

circumstances and were central to the decision to join the
venture.
2. The burden then shifts to the control block to show that dissolution is
not proper, and that there is a less harmful remedy.
a. Note that in NY the majority shareholders may also elect to
purchase the minority shareholder’s stock back at fair value.
Judicial dissolution is another possible remedy.
iii. The Massachusetts Rule: This rule is “pure equity.” O.L.H.
1. The plaintiff must show oppression by someone in control;
a. This is not a difficult burden.
2. The burden then shifts to the control block to show that it had a
legitimate business purpose for its actions;
a. If the control block doesn’t show this, then determine what the
remedy is for the minority shareholders.
3. The burden then shifts back to the plaintiffs (the minority
shareholders) to show that this purpose could have been accomplished
in a less harmful way.
a. After going through the three steps, the court will balance the
information and come up with the answer.
i. This is known as a “ping pong” match.
ii. Any remedy the court finds equitable is available under
this rule.
iv. The Michigan Rule: This rule only applies to a shareholder’s rights as a
shareholder. NOT as an employee.
1. Oppression: A continuing course of conduct that substantially interferes
with the interests of the shareholder as a shareholder.
a. A shareholder has the right to:
i. Receive notice of annual or special meetings;
ii. Pro rata dividends;
iii. Inspect the books and corporate records.
2. Remedies: Dissolution, purchase remedy, and damages.
19. Duties Of The Directors [MBCA§8.30 (Standards of Conduct for Directors)]
a. Three fiduciary duties of directors…
i. Duty of Good Faith; Duty of Care; Duty of Loyalty.
b. Directors’ Duty of Good Faith
i. How do we know what Good Faith is?
1. FACT INTENSIVE – you’ll know it when you see it. There isn’t a law
or three-prong test for the duty of good faith.
ii. Doing something in good faith means not going something in bad faith. Just like
obscenity – we will know it when we see it, there is no legal rule to specifically
say what it is. Depending on the situation in front of us, there can be some
overlap in duties.
iii. Ask yourself, was this action done in bad faith?
c. Directors’ Duty of Care
i. A director shall discharge their duties with the care that a person in a like
position would reasonably believe appropriate under the circumstances.
ii. The Business Judgment Rule: Protects Director Action
1. The Business Judgment Rule (BJR) is a presumption (think of it as a
“shield”) that the decisions made by the board of directors were made

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honestly, in good faith, on an informed basis, without any fraud,

illegality, or conflict of interest.
a. The burden is on the person challenging the directors to prove
that the director’s decision involved fraud, illegality, or conflict
of interest. Only if the plaintiff proves one of those elements
will the court step in.
b. The court will not look to the merits of the case until the plaintiff
successfully strips away the protection of the BJR.
2. What is the standard of review for the BJR?
a. GROSS NEGLIGENCE. Unless the corporation has a waiver in
its articles of incorporation. In that case, the directors will not be
liable unless their conduct rises to the level of intentional
misconduct.
3. What must the plaintiff show if there was no director action?
a. The plaintiff must show that the directors should have been more
active in their duties and that if the director was more informed,
the company would have avoided the losses.
b. Remember, the BJR only protects director action; not inaction.
d. Directors’ Duty of Loyalty
i. A director shall act in the best interest of the corporation. You are not putting
your interests first; you are putting the interests of the corporation ahead of your
own.
ii. There are three commonly litigated issues involving a director’s breach of the
duty of loyalty:
1. Competing with the Corporation: There are two different tests
depending on whether a director or an officer is involved:
a. Director Test: If a director acts in good faith and does not use
corporate resources (broadly defined), they are not liable.
b. Officer Test: An officer (who is an agent) cannot compete with
the principal unless they get CONSENT. In obtaining the
principal’s consent, the officer must…
i. Act in good faith;
ii. Disclose all material information that the officer knows;
and
iii. Deal fairly with the principal (corporation).
1. Note that in some cases the defendant may be
both a director and an officer. In that case you
have to analyze under both tests.
a. Remedies: The court wants to put both
parties in the same position they would
have been in if there had not been a
breach of loyalty. If either party is
seeking money damages, they have to
show harm and proximate cause.
2. Usurping a Corporate Opportunity: An opportunity comes along and
the person takes it for themselves. Two tests apply, depending on what
type of jurisdiction you are in.
a. Guth / Line of Business Test (MBCA): This test involves
balancing the equities. No single factor is dispositive.
i. A corporate officer or director MAY NOT take a
corporate opportunity for himself if: F.L.I.P.

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1. The corporation is financially able to exploit the

opportunity;
2. The opportunity is within the corporation’s line
of business;
3. The corporation has an interest or expectancy in
the opportunity; or
4. By taking the opportunity for himself, the
corporate fiduciary will thereby be placed in a
position at odds with to his duties to the
corporation.
a. NOTE: A corporate opportunity is one
that arises when a person gets the
opportunity because of their position, or
through corporate resources, or is
closely related to the business that the
corporation is expected to be in.
ii. A corporate officer or director MAY take a
corporate opportunity for himself if: R.I.C.E.
1. The director/officer has not wrongfully
employed the resources of the corporation;
2. The corporation holds no interest or expectancy
in the opportunity;
3. The opportunity is presented to the
director/officer in his individual capacity;
4. The opportunity is not essential to the
corporation.
a. Here, the burden is on the
director/officer – the person accused of
the wrongdoing.
i. Remember, this test is strictly to
be used in an MBCA
jurisdiction!
b. ALI Test: This test involves three steps: C.T.E.
i. Determine whether the opportunity was a
CORPORATE opportunity.
1. A corporate opportunity is one in which the
director / officer becomes aware either through
his position, or by using the corporation’s
resources.
a. The burden to prove that it was a
corporate opportunity is on the
challenging party.
ii. Was the corporate opportunity taken by the director
/ officer?
1. A director may NOT take a corporate
opportunity unless he: O.D.R.
a. Offers the opportunity to the corporation
first; and
b. Fully discloses the information
concerning the conflict of interest; and

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c. The corporation rejects the opportunity

and it has been established that the
rejection is both:
i. Substantive Fairness: This
involves (1) fair price, (2) fair
dealing, and (3) showing that
the corporation will benefit.
ii. Procedural Fairness: This
involves showing that
disinterested directors rejected
the opportunity and that
disinterested shareholders
approved or ratified the
rejection after full disclosure.
iii. Evaluate the burden of proof.
1. The initial burden is on the challenging party to
show that the business opportunity was a
“corporate opportunity.”
2. If the director / officer received disinterested
director or disinterested shareholder approval
after full disclosure, the burden is on the plaintiff
to show that the transaction was unfair to the
corporation by showing: (I.F.W.)
a. Inadequate disclosure;
b. Failure of the BJR (for disinterested
directors); or
c. Waste (for disinterested shareholders).
3. The burden then would shift back to the director
/ officer to show that the transaction was fair to
the corporation (substantively fair).
3. Self-Dealing: The key aspect of such transactions is that the key player
(officer, director, or controlling shareholder) and the corporation are on
opposite sides of the transaction. There are different tests depending on
whether the fiduciary is an officer or a director.
a. Officer Test: An agent cannot compete with the principal
(corporation) unless they get CONSENT. In obtaining consent,
the officer must:
i. Act in good faith; and
ii. Disclose all material facts that the officer knows or has
reason to know that would affect the principal’s
judgment.
1. Note that this is the same officer test that applies
to competing with the corporation.
b. Director Test: A transaction involving self-dealing will not be
set aside if it is fair to the corporation. This involves showing:
i. Substantive Fairness: The transaction, judged according
to the circumstances at the time of the transaction, is
established to have been fair to the corporation. The
director must prove all three factors:
1. Fair dealing;
2. Fair price; and

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3. Benefit to the corporation.

ii. Procedural Fairness: This involves showing a majority
vote of both the:
1. Qualified Directors; and
a. The qualified directors must have:
i. No interest in the transaction;
and
ii. No familial, employment, or
financial relationship with the
conflicted director.
2. Qualified Shareholders
a. Qualified shares are those that are not:
i. Owned or controlled by a
conflicted director or related
person.
20. What is a Derivative Lawsuit?
a. A lawsuit where the shareholder stands in the shoes of the corporation in asserting the
claim. The suit is “derivative” because the shareholder’s right to bring it “derives” from
the corporation’s right.
i. A shareholder isn’t acting for himself, but rather is acting on behalf of the
corporation.
b. What are the procedural requirements of a Derivative Lawsuit?
i. Standing: A shareholder may not commence or maintain a derivative
proceeding unless the shareholder: W.T.F.
1. Was a shareholder of the corporation at the time of the act or
became a shareholder through transfer by operation of law; and
a. Examples of “by operation of law.”
i. Death;
ii. Judgment by bankruptcy, divorce, etc.
2. Fairly and adequately represents the interests of the corporation.
ii. Demand: The demand requirement places the issue squarely before the people
who should be making the decision about whether or not to let the lawsuit
proceed. Where demand on the board would be “futile,” the requirement will be
excused.
1. The Delaware Approach: Plaintiffs must allege particularized facts
which create a reasonable doubt that:
a. The directors are disinterested and independent; OR
b. The challenged transaction was otherwise the product of a valid
exercise of the business judgment rule (BJR).
i. If the plaintiff is successful, the demand requirement
will be excused.
2. The MBCA Approach: No shareholder may commence a derivative
proceeding until:
a. A written demand has been made upon the corporation to take
suitable action; and
b. 90 days have expired since the demand was made, unless waiting
would cause irreparable injury to the corporation.
i. Note that the MBCA imposes a universal demand
requirement.

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c. Dismissal of a Derivative Lawsuit—Typically, the board of directors will appoint a

Special Litigation Committee (SLC) of disinterested directors to decide whether the
derivative suit should go forward.
i. There are two rules that deal with dismissal
1. The MBCA Approach: A court will grant a corporation’s motion for
dismissal if the SLC determines in good faith that the derivative suit is
not in the best interest of the corporation.
a. The court may determine whether the committee members were
independent and used adequate investigative procedures, but the
court may NOT look into the decisions of the committee.
i. Unless the plaintiff can show a breach, the court will
accept the decision of the SLC. If the plaintiff
successfully strips away the protection of the BJR, then
the court will look into the substance of the SLC’s
decision.
1. Note how this approach offers the protection of
the BJR.
2. The Delaware Approach: This two-step approach is the complete
opposite of the MBCA approach.
a. The court first inquires into the independence and good faith
of the SLC and the bases supporting its conclusion; and

i. Here the burden is placed on the corporation to show

independence, good faith, and a reasonable
investigation.
1. There is a presumption of taint until the court is
shown otherwise.
b. The court applies its own independent judgment.
i. Here the court will look at the substance of the SLC’s
decision. In applying its own judgment, the court will
determine whether the motion to dismiss should be
granted.
1. Note that there is no protection of the BJR under
the Delaware approach.
21. Various Endgames for the Corporation
a. Dissolution
i. Voluntary Dissolution—To voluntarily dissolve a corporation, there must be two
forms of approval (and notice to the state).
1. Board Approval:
2. Shareholder Approval:
ii. Involuntary (Judicial) Dissolution—This is where the court finds the existence of
deadlock, fraud, illegality, or oppression. If the court finds one of these, the
corporation is forced into dissolution.
iii. Winding-up—paying off debts, giving notice to known and unknown creditors to
let them know that the corporation is dissolving. The final step before
termination is that whatever is left gets paid off, pro rata, to the shareholders
(which is similar to partnership).
b. Merger and Acquisition
i. Where two or more business entities combine into one business entity. The
“acquiring” company takes over the “target” company.
ii. There are two methods for a merger or acquisition…

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1. Stock Acquisition OR Asset Acquisition

c. What are the 4 Major Areas of Concern in Mergers and Acquisitions?
i. Liabilities—All liabilities of each corporation or eligible entity that is merged
into the survivor are vested in the survivor, see §11.07(a)(4).
ii. Director Approval—The board of each constituent corporation must initiate the
merger by adopting a document known as a plan or merger. The plan outlines
the terms and conditions of the merger (including how the shareholders will vote
on it) and the consideration that the shareholders of the acquired corporation will
receive. MBCA §11.04(a). Under some statutes, the merger may also amend the
articles of the acquiring surviving corporation. MBCA §11.02(c)(4).
iii. Shareholder Approval—After board adoption, the plan of merger must generally
be submitted to the shareholder of each corporation for their separate approval.
MBCA §11.04(b).
1. Typically you need shareholder approval of both the acquiring and the
target company. However, you do not need shareholder approval if one
of these four exceptions exist: (S.A.V.E.)
a. The corporation will survive the merger or is the acquiring
corporation in a share exchange;
i. You will always need shareholder approval from the
target corporation.
b. The corporation’s articles of incorporation will not be changed;
c. The shareholders will own the exact same rights after the
exchange; or
d. The issuance in the merger or share exchange does not require a
vote.
iv. Appraisal Rights
d. What are the Primary Shareholder Protections?
i. Four Areas
1. Right to Vote (Against the Merger)
2. Right to sue the Directors for breach of the duty of care
a. See Smith v. VanGorkam
3. Right to sue the Directors for breach of the duty of loyalty
a. See Weinberger v. UOP, Inc.
4. Assert the dissenting shareholder’s right of appraisal
a. A shareholder who properly asserts her dissenting shareholder’s
right of appraisal can compel the corporation to pay her in cash
the “fair value” (not fair market value) of her shares as
determined by a judicial appraisal process, see HMO-W v. SSM.
e. Sale of All or Substantially All Assets
i. The general common law rule is that the buyer of a corporation’s assets is not
liable for the selling corporation’s debts. The buying corporation assumes only
those liabilities as provided for in the contract.
ii. Shareholder Approval of Certain Disposition, see MBCA § 12.02
1. Shareholder approval is required if the disposition would leave the
corporation without significant continuing business activity.
2. Safe harbor – TEST that will tell you for sure when you don’t need
shareholder approval. If the remaining interest (as of the end of the prior
year) is: (what you are keeping)
a. (1). 25% of assets AND
b. (2). One of the following:
i. 25% of revenues OR

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ii. 25% of income (pre-tax).

3. NOTE: if you fall in the safe harbor you fall into the conclusive
presumption that you still have significant continuing business activity.
This is an example of a REAL safe harbor! If you fall into this you’re
fine!!!!
4. If you’re outside the Safe Harbor, you’re not sunk but you back to trying
to prove that you have a significant continuing business interest.
f. De Facto Merger Doctrine
i. Common Law Test—not universal – it is the CL position in our state. You could
argue that the legislature left this area open in the statute to allow the court to
step in.
ii. TEST De facto Merger—Marks factors that indicate whether a purported asset
sale is the legal equivalent of a merger:
1. Was the consideration paid for the assets solely stock of the parent.
a. Was there Adequate Cash Consideration?
2. Did the purchaser continue the same enterprise after the sale;
3. Did the shareholders of the seller become the shareholders of the
purchaser;
4. Did the seller liquidate; and
5. Did the buyer assume the liabilities necessary to carry on the business of
the seller?
iii. NOTE—When talking about adequacy we are talking about cash.
1. Example: The target corporation is worth $100 Million and the acquiring
corporation wants to purchase it. The Target Corporation was acquired
by giving A common stock of the acquiring corp. The shareholders of T
now are shareholder of A. This looks like a merger (the duck rule).
Therefore, this will be treated like a merger and their liabilities will be
taken on.
g. Tender Offers—Taking control of a public corporation. Tender offers are pure and
simple stock deals. The acquiring corporation (“shark”) buys shares from shareholders.
Board and shareholder approval is not necessary – only that each individual shareholder
makes the decision to sell or not.
i. Hostile Takeover—the board of the target company doesn’t want the offer to
occur and tries to do something to prevent this from happening.
ii. Friendly Takeover—the board of the target company either likes the tender offer
or doesn’t get in the way.
iii. Takeover Defenses
1. Unocal Test (two-part test to get BJR protection)
a. The board in good faith must reasonably perceive that there is a
threat (board can show they acted in good faith with a
reasonable investigation) to continued corporate effectiveness.
b. And, the defensive measure must be reasonable in relation to the
threat posed.
c. NOTE—BJR applies unless there is a preponderance of evidence
that the directors’ decisions were primarily based on
perpetuating themselves in office, or some other breach of
fiduciary duty such as fraud, overreaching, lack of good faith, or
being uniformed.
2. Revlon Test—the court held that once a board decides that the
corporation is for sale, the board cannot take defensive measures.
a. At this point, the board’s duty is to maximize shareholder value.

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b. Revlon applies when a corporation undertakes a transaction that

will cause either…
i. A change in corporate control; or
ii. A break up of the corporate entity, the director’s
obligation is to seek the best value reasonably available
to the stockholders.
iv. Regulation of Takeovers—The Williams Act of 1968—source of corporate law
1. Rule 13D—Filing—when a person owns 5% or more of the stock of a
public company, that person must report…
a. Identity—who they are (name and background)
b. Source and the amount of funds—where the financing is coming
from
c. Number of share’s held
d. Any arrangements—are they part of a group?
e. Purpose/intentions—why they have the shares/what is the
purpose (investment or takeover)
2. Rule 14D—Regulation of Tender Offer—only applies to publicly
exchanged companies.
a. How Long—20 business days (material changes starts period
over again)
b. All Holders Rule 14d-10—tender offer must be open to all
shareholders of the same class
c. Best Price Rule—every shareholder must get the best price offer
during the tender offer period.
d. Pro Rata Purchases—if a tender offer is for 50% at $40 per
share—what if 100 % want to take advantage? Cannot pick and
choose – it’s pro rate. Everyone will be treated pro rate the same
22. Insider Trading
a. Common Law Approach to Insider Trading:
i. Majority Rule: There is no duty to disclose absent a relationship of trust and
confidence (a fiduciary relationship).
1. The insider can be SILENT and it will not amount to fraud under this
rule. Absent a fiduciary relationship, there is no duty to disclose.
ii. Minority Rule: Requires full disclosure where the insiders have special facts, at
least in face-to-face transactions.
b. Rule 10(b)(5) is the current rule that regulates insider trading:
i. Where there is material, non-public information in connection with a purchase
or sale of any security, insiders have a duty to abstain from trading or disclose
the information to the corporation and the shareholders at large.
1. Scienter requirement: The purchase or sale of the security must be “on
the basis of the material non-public information.”
2. Materiality Test: Whether a reasonable man would attach importance or
significance in determining his choice of action in the transaction in
question.
a. Whether facts are material will depend upon a balancing of both
the probability that the event will occur and the anticipated
magnitude of the event.
i. The higher the probability and the magnitude, the easier
it is to meet the materiality test.

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c. There are currently three theories of Insider Trading:

i. Classic Insider Trading: A person in a position of trust or confidence who wants
to trade on material, non-public information of his company must either:
1. Disclose it to the investing public, and once its effective, go ahead and
trade; or
2. Abstain from trading until a reasonable time after the information
becomes public.
a. The “classic” theory only applies to insiders of the target – the
corporation that is being bought or sold.
i. This theory really just restates the requirements of Rule
10(b)(5).
ii. Tipper / Tippee: The tippee’s liability is derivative of that of the tipper.
1. Tipper
a. An insider who has breached his fiduciary duty by disclosing
information to the tippee for his own personal benefit or gain.
i. The tipper has to benefit in some way. It doesn’t
necessarily have to be an economic benefit to qualify.
2. Tippee
a. A tippee must either know, or should have known that the tipper
breached his fiduciary duty.
iii. Misappropriation: A person commits fraud “in connection with” a securities
transaction, and thereby violates § 10(b) and Rule 10(b)(5) when he:
1. Misappropriates confidential information for securities trading purposes,
in breach of a duty owed to the “source” of the information; and
2. He feigns loyalty to the source.
a. This theory focuses on outsiders of the company who basically
steal information from some other party and then trades it.
d. Remedies
i.
e. Short Swing Profits – RULE 16(b) [KNOW FOR EXAM]
i. A director, officer, or more than 10% shareholder of a corporation whose stock
is publicly traded (or has a net worth of at least $5 million and 500 shareholders)
is strictly liable to the corporation for any profits derived from a (1) sale and
purchase, or (2) purchase and sale, of securities of the corporation within any
period of less than SIX MONTHS (KNOW TIME).
1. Strict liability means scienter is irrelevant.
2. Disgorgement of the short swing profit goes to the corporation, not the
shareholders.
a. Director / Officer: Must only be in that position during the time
of either the sale or the purchase.
b. 10% Shareholder: Must have held more than 10% immediately
before both the purchase and the sale.
i. Look at the lowest buy and the highest sale in a 6 month
period and match them (there might be more

_____________________________________________________________________________________

Securities Act of 1933

1. General Information
a. Public didn’t have all the information they needed to make the decisions needed to buy
and sell stock (Congress was trying to solve this)

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b. Focusing on getting information into hands of potential investors so they can make
informed decisions

2. What is a “security?” 2(a)(1): This is a BROAD definition!

a. Section 2(1) of the 1933 Act contains a long list of financial instruments that qualify as
securities, including, among other things, stocks, bonds (i.e., long-term debt instruments
secured by liens on corporate property), debentures (i.e., long-term unsecured debt
instruments), futures and warrants (i.e., options to purchase shares from the
corporation). The section also contains some catch-all terms that qualify as securities,
including certificates of interest in profit-sharing agreements and “investment
contracts” (which has a whole body of case law to define).
b. Limited partnership interests and membership interests in LLCs are securities.

3. Primary Objectives
a. Disclosure of information to public
b. Prevent misrepresentation, deceit, fraud, etc, in sale of securities
4. Registration requirement
a. Required to file registration statement with SEC
b. Statement is designed to provide material information about the company that will be
offering and selling securities
i. Section 5
c. Cannot sell stock until the registration document is finalized
d. No standard form, specific to the company
5. Investment Contract
a. An investment of money in a common enterprise, the investor expecting to derive a profit
from the investment, and profit, if any, to be derived solely or substantially from the
efforts of persons other than the investor
i. Section 2(a)(1)
ii. Is subject to registration requirement
b. SEC v. Edwards
i. Facts
1. Were purchasing pay phones
ii. Analysis
1. Subject to 33 Act because the people purchasing the pay phones were not
actually responsible for upkeep etc
2. Was an investment K situation
3. They were just going to sit back and collect the profits
4. Doesn t matter what type of return you are getting
c. What is the four-part test to determine whether a “scheme” involves an investment
contract?
i. TEST: A security scheme (or an investment contract) in which someone:
1. Invests money
2. In a common enterprise
3. With the Profits to come
4. Solely from the efforts of others.
d. Does it matter if you offer an investor a fixed rate of return or a variable rate of return?
i. No, the Supreme Court didn’t find it necessary to distinguish between the two for
purposes of the test (the test to determine whether a particular scheme is an
investment contract). You still need to file with the SEC!!! They are all
securities!!!

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1. Investments pitched as low-risk (i.e. those offering a guaranteed fixed

return) are particularly attractive to individuals more vulnerable to
investment fraud
6. Exemptions from Registration
a. Section 3: Exempted Securities – Deals with classes of exempted securities – because of
their nature they are never required to be registered (Banks, Insurance K’s).
i. Section 3(a)(11) – Congress has not chosen to regulate this, but they could
(remember, the jurisdictional element must be met though).
1. If you are involved in a transaction that is only offered and sold to
persons residing in State A only – it is exempt. The business also can
only be doing business in that state too. This also has something to do
with banks as well.
a. NOTE: Don’t forget that every state has its own securities law.
b. Very fact intensive and hard to meet
b. Section 4: Exempted Transactions
i. Section 4(2): This is where because of the nature of the transaction we aren’t too
worried about it, but if you want to buy or sell again you either have to register it
OR find another exemption. This individual transaction is exempt, but future
transactions might not be.
1. Transactions by an issuer NOT involving any public offering.
a. If this is strictly a private transaction we aren’t worried about the
transaction and we will exempt the transaction. But this now
raises the issue of what is a public offering as opposed to a
private offering.
ii. Private Offering Exemption – Section 4(2). SEC v. Ralston Purina Co.:
involving what a public offering is as opposed to a private offering.
1. Facts – Ralston Purina had a corporate resolution that authorized the sale
of common stock to employees and they didn’t follow the registration
requirement.
2. Holding/Reasoning – The design of the statute is to protect investors by
promoting full disclosure of information thought necessary to informed
investment decisions. The focus of the inquiry should be on the need of
the offerees for the protections afforded by the registration. The
employees in this case were not shown to have access to the kind of
information which registration would disclose; therefore, this is now a
public offering and doesn’t fall under the exemption. These employees
need the information provided by the registration in order to be an
informed investor.
a. TEST – An offering to those who are shown to be able to fend
for themselves is a transaction NOT involving any public
offering.
i. The focus of inquiry must be on the need of the offerees
for the protections afforded by the registration and their
ability to get information to make an informed
investment decision
1. Kerkorian looking to buy $1B of stock can get
the info from the company.
2. Me looking to buy 50 shares can’t get the info.
b. Who has the burden of proof?
i. The issuer has the burden of proof to show that the
exemption should apply.

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CIVIL PROCEDURE I OUTLINE

Professor Martha Moore, Michaelmas Term 2010

OVERVIEW

1 Which State(s) can we file suit? – Personal Jurisdiction

2 What Court? Federal Option available? Federal Cts. have limited
hearing by constitutional mandate – Subject Matter
Jurisdiction Forum Shop
3 Which Federal judicial district(s) are available? – Venue
analysis
4 If conflict in Federal Ct between State and Federal Law, we use
Erie doctrine
5 Pleading – what do pleading look like, promulgated
specifications
6 Simple Joinder – deciding who you want in law suit, what
claims etc. [Ex. Multiple parties = might affect venue etc.]

Jurisdiction: Literally means power. For a court’s judgment to be a valid binding decision, need two
doctrinal powers:
1. Personal jurisdiction: power over the person in the case
2. Subject Matter jurisdiction: power to hear the subject matter of suit
_____________________________________________________________________________________

PERSONAL JURISDICTION
1. The power of a given court to issue a judgment that is binding on a person or affects his property.
a. In Personam Jurisdiction—Power over the person.
b. Pure In Rem Jurisdiction—Power over a party’s property. Settles questions of
ownership and control of the property as against the whole world.
i. No longer valid because of Shaffer.
c. Quasi In Rem—Power over person through power over person’s property; i.e. settle
personal dispute between parties but only up to the value of the property located in that
state.
i. No longer valid because of Shaffer.

2. Sources of Law
a. Constitutional Law
i. Article III—Federal Subject Matter Jurisdiction
ii. Article IV—Full Faith and Credit Clause
1. Requires judgments to be respected and enforced in other states only if
the original court rendering the judgment had jurisdiction
iii. Article VI—Supremacy Clause
iv. Due Process Clauses
1. 5th Amendment for Federal courts
2. 14th Amendment for State courts
b. Statutes (1331, 1332, 1391, 1367, 1404, 1406, 1631, 1446, 1447)
c. Federal Rules of Civil Procedure

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3. Establishing Personal Jurisdiction Over An In-State Defendant (Is it there?) (see Pennoyer)
a. Domicile (defendant is there indefinitely)
i. Look at where the person is registered to vote
ii. Where they have a drivers license
iii. Where they have bank accounts, pay personal taxes
iv. Where they are employed
1. Only applied to individuals (NOT corporations)
b. Transient Jurisdiction (Tag)—party served with process while voluntarily in state
(ONLY individuals (see Burnham)
i. Example: case where wife served husband with process while he was in
California to visit the kids.
c. Quasi in Rem (but only to extent that property is attached pre-suit)
i. Overruled via Shaffer.
d. Consent (cannot be obtained through fraud, overreaching, or bad faith)
i. Defendant consents to bring there (Example: forum-selection clause)
e. Waiver
i. Party fails to properly object to the assertion of personal jurisdiction

4. Establishing Personal Jurisdiction Over An Out-of-State Defendant (Is it fair?)

a. Statutory Analysis (the highest court determines the interpretation of the Long-Arm
Statute)
i. Non-Limiting—allows a state to assert Personal Jurisdiction over the out-of-state
defendant to the fullest extent permitted by the constitution.
ii. Limiting/Enumerated—specifies certain conditions under which a state can
exercise Personal Jurisdiction over an out-of-state defendant.
b. Constitutional Analysis—the exercise of Personal Jurisdiction over a nonresident will
not offend traditional notions of fair play and substantial justice, if…
i. Minimum Contacts (Applies to both individuals and corporations)
1. Purposeful Availment Doctrine—some activity by which the defendant
purposefully avails (benefits) himself of the privilege of conducting
activities within the forum state, thus invoking the benefits and
protections of its laws that may give rise to obligations (see International
Shoe).
a. Directed Activity (voluntary contact)
i. Example: A defendant driving through the state and
getting into an accident
b. Stream of Commerce Theory (see Asahi) (mention both on exam)
i. MERE AWARENESS (Brennan)—injecting goods into the
stream of commerce should suffice to support
jurisdiction. Awareness alone should be sufficient.
ii. MERE AWARENESS PLUS (O’Connor)—also need
directed activity, along with putting goods into the
stream of commerce. Mere awareness is not enough.
1. Example: if the company designed, provided
advice, advertised or marketed in forum state.
iii. NOTE —in order to apply the stream of commerce theory,
you MUST have a middleman.
c. Calder Effects Test (ONLY applies to intentional torts)
i. Minimum contacts sufficient to support specific
jurisdiction can be established by intentional conduct
taken outside the state where the actor knows and

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intends that the effects of the conduct will be felt in the

forum state
d. Internet Cases
i. The court tries to make a distinction between an
interactive website and a passive website.
1. Example: you can place an order (enter into a
contract w/residents of a foreign jurisdiction) in
an interactive website. In a passive website you
make information available for viewing only.
a. Middle Groundinteractive site that
exchanges info with host computer.
ii. If the website is found to be interactive, there is a better
chance that a court will uphold jurisdiction (see Zippo as
the leading case).
2. Predictability/Foreseeability/Fair Warning Rationale
a. Defendant enjoyed the benefits of the forum, therefore they must
be subject to the laws there
b. Defendant’s conduct and connection with the state are such that
he should reasonably anticipate being haled into court there
c. Based on quid pro quo logic
3. Relatedness Factors
a. General Jurisdiction (unrelated to controversy)—the controversy
need not be related to the defendant’s contacts with the forum.
i. Contacts must be…
1. SUBSTANTIAL—money being exchanged
2. SYSTEMATIC—business activities conducted on
a regular basis (not sporadic)
3. CONTINUOUS—uninterrupted
ii. Easily identifiable circumstances of general jurisdiction
1. State of incorporation
b. Specific Jurisdiction (related to controversy)—the suit arises
directly out of the contact within the forum state. Sporadic
forum activity may be sufficient.
i. Examples: you’re driving through the state and cause an
accident.
ii. Reasonableness Factors (see World-Wide Volkswagen v. Woodson)
1. The Plaintiff’s Interest in Obtaining Convenient and Effective Relief—
this factor is weighed the most heavily
a. Identify the plaintiff’s interest
i. Example: where the accident took place, all the
witnesses are there
2. The State’s Interest in Adjudicating the Dispute—2nd most relevant
a. The state wants to protect its citizens
i. Example: state has an interest in protecting its roads
3. Burden on the Defendant—this factor is afforded the least amount of
weight
4. Interstate Judicial Economy
a. Is this the most efficient state to try this case in?
i. I.e., where are the witnesses, what law is going to apply?
5. Social Policy (the shared interest of the several states in furthering
fundamental substantive social policies)

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 NOTE: on the exam, you should mention all 5 of these factors

 NOTE: even if “reasonableness factors” support jurisdiction, there can be no
jurisdiction without minimum contacts.

ATTACKING LACK OF PERSONAL JURISDICTION

1. Direct Attack (defendant challenges Personal Jurisdiction in the original suit)
a. Defendant can assert any and all defenses to the suit, in addition to lack of Personal
Jurisdiction
2. Collateral Attack (defendant files second suit to challenge default judgment in first suit)
a. Defendant ignores the lawsuit because there is no Personal Jurisdiction
b. Defendant waives all defenses except lack of Personal Jurisdiction
c. The only thing that can be challenged by collateral attack is jurisdiction of the court to
decide the controversy
_____________________________________________________________________________________

NOTICE
1. After establishing Personal Jurisdiction, you must give…
a. Notice—notice “reasonably calculated,” under all the circumstances, to notify the
defendant of the action
i. This is the constitutionally minimum standard of notice
ii. Examples (?) paper, email
2. The Mullane Case
 The Due Process clause requires that deprivation of life, liberty or property by
adjudication be preceded by notice and the “opportunity to be heard”
 Even if there is otherwise a proper basis for jurisdiction, a court cannot exercise
jurisdiction over a person without providing proper notice
 Actual notice will NOT cure a defective service
3. RULE 4 (applied to Federal Courts)—sets the procedure for notifying a defendant that a
federal civil lawsuit has been filed against him through service of process (Proper service is a
prerequisite for the exercise of personal jurisdiction, but does not, by itself, confer personal
jurisdiction; must separately determine whether there is personal jurisdiction, subject matter
jurisdiction, and venue).
a. Once you file the summons and complaint, you have 120 days to serve the defendant
b. Rule 4(A)(C) Summons
i. Form of summons is standardized in Federal Court
ii. Summons and complaint must be served together on the defendant after the
complaint is filed
iii. The plaintiff is responsible for preparing the summons in the appropriate form
and for achieving effective service on the defendant
iv. Process server may be any adult who is over the age of 18 and is not a party to
the suit
c. Rule 4(D) Waiver
i. The plaintiff’s request that the defendant waive service must be in writing. The
request must be addressed directly to the defendant and include a copy of the
complaint.
ii. The defendant must be provided with at least 30 days to return the waiver (60
days if outside the U.S.)
iii. Does not apply to U.S.; agencies, corporations, or officers of the U.S.; other
governmental entities; infants or incompetents.

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iv. Incentive to Waive—defendant gets 60 days following request for waiver to

answer complaint (90 days if outside the U.S.), instead of 21 days per FRCP 12.
v. Penalty for Refusal to Waive Without “Good Cause”—defendant assessed costs
of formal service of process, plus any attorney’s fees, incurred by the plaintiff in
order to recover said costs from the defendant.
d. Rule 4(E) Service on Individuals—service of process on any competent adult individual
found in the U.S. can be made;
i. Pursuant to specific federal statute
ii. Pursuant to state law
iii. By waiver under Rule 4(D)
iv. By personal service
v. By leaving at the defendant’s home
vi. By leaving with an authorized agent
e. Rule 4(H) Service on Corporations—service of process on corporations or associations
in the U.S. can be made; [NOT ON EXAM]
i. Pursuant to specific federal statute
ii. Pursuant to state law
iii. By waiver under Rule 4(D)
iv. On officer, managing agent, or general agent
v. On other agent
f. Rule 4(K) Territorial Limits—federal courts can exercise personal jurisdiction over
parties…
i. Who are subject to jurisdiction in the state
ii. pursuant to the “100 Mile ‘Bulge’ Rule”
iii. Who are subject to jurisdiction under Federal Interpleader Statute (28 USC 1335)
iv. Who are subject to suit pursuant to a federal statute providing for national or
worldwide service of process (Federal long-arm statute—look at defendant’s
contacts with the nation as a whole, since defendant has insufficient contacts
with any state).
4. Service of Process
a. In serving individuals, process need not be handed directly to the defendant
b. Motion for Substitute Service (email, newspaper) so long as “reasonably calculated”
c. Recipient need not be an adult, just someone of “suitable age and discretion”
d. Generally, recipient must be resident of “usual place of abode”
i. Service upon non-resident maid or landlady ruled insufficient
ii. Place of employment is NOT a dwelling place
iii. The latest shelter at which a homeless person slept does NOT constitute a
dwelling house or place of abode; personal service may be only option
iv. Courts have held a hotel to be a person’s usual place of abode
e. Persons are generally immune from service when…
i. Present in jurisdiction to attend court
ii. Present to give a deposition
iii. Conduct settlement discussion in connection with another unrelated lawsuit
iv. Immunity typically extends for a reasonable period before and after pleadings
v. Lured by fraud or trickery
f. Immunity can be waived by…
i. Arriving in the jurisdiction prematurely
ii. Conducting other business while in the jurisdiction
iii. Failing to leave the jurisdiction promptly
iv. NOTE—immunity may not apply where the defendant served with process in
conjunction with same case or case arising out of same subject matter.

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_____________________________________________________________________________________
SUBJECT MATTER JURISDICTION
 Plaintiff may file in Federal Court only if the case falls within limited parameters of federal
subject matter authority
 Subject Matter Jurisdiction must exist for the court to render a binding, enforceable judgment
 No Full Faith and Credit unless the court has subject matter jurisdiction over the controversy
 Federal Courts are courts of limited jurisdiction
 Subject Matter Jurisdiction can never be waived
 Subject Matter Jurisdiction can be raised at any time
 Article III, Section 2 is where you get your constitutional “ticket” to get into Federal Court
o Two ways to “get the ticket”
 Federal Question Jurisdiction (28 U.S.C. § 1331)
 Diversity Jurisdiction (28 U.S.C. § 1332)
1. Federal Question Jurisdiction (28 U.S.C. § 1331)—The district courts shall have original
jurisdiction of all civil actions “arising under” the Constitution, laws, or treatises of the United
States (citizenship of the parties/amount in controversy are not issues)
a. The Creation Test
i. When your federal question is based on § 1331
ii. Your lawsuit is created by federal law
1. Example: your U.S. Constitutional right was violated
b. The Federal Ingredients Test—When your lawsuit doesn’t arise under a federal law or
federal treaty. It is a state law claim, but somewhere in the mix are federal ingredients.
i. Narrow Exception—federal court has federal question jurisdiction over state law
claim if it…
1. Necessarily raises a stated federal issue,
2. Which is actually disputed and substantial
ii. See Grable & Sons Case
1. The suit was an action to quiet title, which was a state law claim, but in
order to resolve the issue, the court had to use a federal law.
c. The Well-Pleaded Complaint Rule (see Mottley Case)—applies to both tests above…
i. The Federal Question Jurisdiction requires that there be some significant issue of
federal law that is an essential element of the plaintiff’s “well-pleaded”
complaint.
ii. The federal court will examine only so much of the complaint as is well pleaded
– confined to its essential element – to decide whether there is federal question
jurisdiction.
iii. A suit “arises under” federal law only when the plaintiff’s statement (complaint)
of his own cause of action shows that it is based upon federal law.
iv. Plaintiff cannot invoke original jurisdiction of a federal court by either
anticipating a federal defense or otherwise importing a federal question into his
complaint that is not essential to his case.
1. Potential of federal question not enough.
d. Key Questions in Determining if There is Federal Question Jurisdiction
i. Is there a federal issue?
ii. Is the federal issue an essential part of the plaintiff’s well-pleaded claim?
iii. If federal law is not the basis for the plaintiff’s claim, is the federal issue
sufficiently important to resolve the dispute?
1. Exceptions
a. Divorce Exception
b. Probate Exception

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2. Diversity Jurisdiction (28 U.S.C. § 1332)—there must be complete diversity among the parties
(see Strawbridge v. Curtis).
a. Amount in controversy exceeds $75,000, exclusive of interest and costs, AND
b. The suit must be between…
i. Citizens of different states
1. US Citizen (State A) v. US Citizen (State B)
ii. Citizens of a state and citizens of a foreign state
1. US Citizen v. Foreign (Defendant from Canada)…and vice versa
iii. Citizens of different states and in which citizens of a foreign state are also
parties
1. Aliens cannot sue aliens in Federal Court
2. US (and Foreign) v. US (and Foreign)
a. MI + Canada v. CO + Canada = OK
b. MI + Canada v. Canada = NOT OK
iv. A foreign state as plaintiff and citizens of a state or of different states
1. Foreign State v. US Citizen
c. Subject Matter Jurisdiction is Based on Citizenship
i. Individual (citizen + domiciled)—an individual’s domicile is determined by the
place of a person’s true, fixed, and permanent home and principal establishment
and to which he has the intention of returning (see Mas v. Perry).
1. Residence does not equal domicile
2. A domicile can be changed by the person
a. Physically moving, and
b. Intending to stay there indefinitely (to make the state one’s new
home)
i. Does NOT require proof of intent to remain permanently
ii. “Vague possibility” of eventually going elsewhere does
not defeat finding of domicile in new state of residence
ii. Corporation—a corporation’s citizenship is determined by…
1. State of Incorporation, AND
a. A corporation can have more than one state of incorporation
2. Principal Place of Business
a. A corporation can only have one principal place of business
b. NOTE—corporations can have dual citizenship
c. Principal Place of Business is determined by…
i. Nerve Center Test—look to where executive and
administrative functions are controlled; the corporation’s
operating headquarters.
3. How is the citizenship of partnerships or unincorporated associations
determined?
a. Based on the citizenship of each partner
b. Considered citizens of every state in which one or more partners
is a citizen
c. Courts must consider citizenship of all partners, whether general
or limited.
iii. Aliens
1. 1988 Amendment—for purposes of §1332(a), an alien admitted to the
US for permanent residence is deemed a citizen of the state in which the
alien is domiciled.

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a. Applies only to limited diversity jurisdiction, not meant to

expand it (see Saadeh v. Farouki, but other circuits have
interpreted the statute differently).
b. Designed to limit Federal Court jurisdiction
c. You cannot read this Amendment literally
d. The alien will be found to be from whatever place destroys
diversity jurisdiction
i. Example: Plaintiff (France) v. Defendant (MI or France)
1. The court will find that they are domiciled in
France
2. This will destroy diversity jurisdiction
d. Time of Filing Rule
i. Diversity of citizenship is determined at the time the complaint is filed
ii. Subsequent changes in citizenship or domicile will not divest or confer
jurisdiction
iii. If there is no diversity when the complaint is filed, it cannot be created by a
change of citizenship/domicile by party
iv. But the court may cure the jurisdictional defect by dismissing dispensable, non-
adverse party pursuant to FRCP 21.
e. Amount in Controversy Must Exceed $75,000, Exclusive of Interest and Costs
i. Allegations of pleadings control unless it appears to a legal certainty that the
claim is really for less than the jurisdictional amount
ii. Amount in controversy is determined as of the date of commencement of the
action
iii. Aggregation of Claims (trying to satisfy the “amount in controversy”
requirement)
1. One plaintiff with two or more claims against one defendant may
aggregate, even if the claims are unrelated
a. All claims add up to the requisite amount in controversy
b. All claims a plaintiff has against a defendant get to be added
together
2. Multiple plaintiffs with claims against one defendant may NOT
aggregate if their claims are separate and distinct
3. Where multiple plaintiffs or multiple defendants have common undivided
interest or single title or right, the value of the total interest controls
a. Example—all the plaintiffs, or all the defendants own property
under tenancy in common

3. Supplemental Jurisdiction (applies only to Diversity Jurisdiction)

a. Need at least “one claim with ticket” for supplemental (even if that one claim with
ticket only got ticket from aggregation)
b. Use supplemental jurisdiction when you cannot use aggregation
c. Supplemental jurisdiction is discretionary, meaning that a judge doesn’t have to grant it.
d. Pendent Jurisdiction: Court extends jurisdiction over a freestanding federal claim to an
otherwise jurisdictionally insufficient state law claim, called a “pendent” claim, brought
by the plaintiff.
e. Ancillary Jurisdiction: Court extends jurisdiction from a freestanding federal claim to
an otherwise jurisdictionally insufficient claim by the defendant
f. Step One: 28 U.S.C. §1367(a) “SCNOOF”
i. Does the jurisdictionally insufficient claim arise out of the same common
nucleus of operative fact?

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1. Are the claims so related that they form part of the same case or
controversy? Do they arise from the same transaction or occurrence?
2. If no, THEN NO supplemental jurisdiction
3. If yes, proceed to 1367(b)
g. Step Two: 28 U.S.C. §1367(b)
i. Courts have original jurisdiction over claims that are based on diversity
jurisdiction, so you must look at 1367(b) when the original claim gets its ticket
through diversity jurisdiction.
1. If you claim is based on federal question jurisdiction, you don’t even
have to look at this step
ii. If the claim is seeking to be joined by a defendant, the claim will be allowed
iii. Four Steps you must look at to determine if the claim will be allowed “DPJD”
1. Is the first claim (anchor claim) based on diversity jurisdiction?
2. Is the claim that you are seeking to join being filed by a plaintiff?
3. Is the claim seeking to be joined by Rule 14 or Rule 20?
a. Against a party joined
i. If the claim is being joined against (i.e. across the “v”)
parties joined, the claim won’t be allowed
ii. If the claim is joined by parties joined, then it will be
allowed (and ignore amount in controversy requirement)
4. Does the claim destroy diversity jurisdiction?
iv. If the claim is not excluded by 1367(b), then it will be allowed
h. Step Three: 28 U.S.C. §1367(c)
i. Even if the proposed supplemental claim passes the tests laid out in 1367(a) and
(b), the Federal Court may still decline to exercise jurisdiction where…
1. The supplemental claim raises novel or complex issues of state law
2. The supplemental claim substantially predominates over the federal
claim
3. The court has dismissed all federal claims, OR
4. For other compelling reasons
NOTE—Anchor Claim (claim with a ticket); Orphan Claim (claim without a ticket)
4. Removal Jurisdiction (28 U.S.C. §1441(a))
a. Removal can only be from state to Federal Court. Can’t remove from Federal to state
court.
i. Only original defendants can remove
ii. All defendants must agree to the removal
iii. Any civil action brought in state court over which the federal courts have original
jurisdiction may be removed to Federal Court by the defendant, only to the
Federal District Court and division of that district where the state action is
pending
iv. Exception: The Home State Defendant Rule
1. If the lawsuit is filed in the home state of the defendant, the defendant
cannot remove (cannot agree to remove with other defendants).
a. Only applies to Diversity Jurisdiction
b. Does not apply to Federal Question Jurisdiction
v. Exception: The One Year Rule
1. If one defendant who defeats diversity jurisdiction settles with the
plaintiff and is gone from the case, the other defendant has one year to
remove the case to Federal Court (from the time of filing, or however
much time is left)

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a. If they settle after a year, the defendant can’t remove

b. Does not apply to Federal Question Jurisdiction
b. State case may NOT be removed to Federal Court merely because defendant asserts a
federal defense
c. Well Pleaded Complaint Rule bars same
d. If the defendant files a counterclaim based on federal law, the plaintiff may not remove
the case, because removal is ONLY the defendant’s right
i. Defendant’s include ONLY those sued by the plaintiff
ii. Plaintiff, even though a defendant on a counterclaim, is NOT a defendant for
purposes of the removal statute
iii. There is NO reverse removal right
e. If state plaintiff has possible federal question, but does not assert it, defendant may not
remove case by relying on unasserted claim
f. However, if state plaintiff subsequently amends complaint to add federal claim,
defendant may remove

g. Procedure for Removal: 28 U.S.C. 1446

i. Defendants notice of removal must be filed within 30 days of;
1. Defendants receipt of initial pleading or summons in the case; or,
2. Defendants receipt of pleading, motion, order or other paper from which
it might first be ascertained that case is removable, EXCEPT that
defendant CANNOT remove on the basis of diversity more than one
year after commencement of the action

h. Procedure for Remand: 28 U.S.C. 1447

i. A motion for remand based on any defect other than SMJ must be made within
30 days after filing notice of removal
1. Must be for an improper removal
2. Must include copies of all papers previously filed in state court
3. Can remand any time before final judgment for lack of SMJ
_____________________________________________________________________________________

VENUE
 Venue brings you to the courthouse steps
 Can be waived and can consent
 Venue is purely statutory
 The touchstone for venue is convenience for the parties and the court

1. 28 U.S.C. 1391 provides for two general alternatives and a “fall back” provision and
provides that venue lies;
a. Where any defendant resides, if all defendants reside in the same state; or
i. This test can be used whether there is one defendant, or more than one defendant
b. Where a substantial part of the events or omissions occurred, or a substantial part
of property is located
i. Always apply BOTH of these tests on the exam.
ii. If you can establish venue under one of these two tests, you should still mention
the fall back provision but you don’t have to go through the analysis.
c. “Fall Back” Provision
i. In diversity cases, its wherever you can establish PJ over the defendant at the
time the lawsuit is commenced.

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ii. In other cases, the plaintiff may sue in any judicial district where any of the
defendants reside
1. Only go to the fall back provision if you can’t establish venue under one
of the two tests.
2. Only use this alternative if no venue anywhere in the country
a. Ex. Action took place in international waters and both
defendants are not from the same state.

2. Venue is based on “Residence”

a. Individual—residence = domicile
i. An individual can have only one residence for venue purposes
b. Corporations—can be sued in any district where they are subject to PJ.
i. Corporations reside where you can establish PJ over them
ii. General Jurisdiction (district of incorporation or contact is substantial,
systematic, and continuous)
iii. Specific Jurisdiction—minimum contacts test (on the exam you can hide a PJ
issue in a venue question).
1. Only have to talk about minimum contacts when applying the Venue
Test
c. Aliens—can be sued in any district

3. Transfer Provisions
a. 28 U.S.C. 1404—For the convenience of the parties and witnesses, in the interest of
justice, a district court may transfer any civil action to any other district or division where
it might have been brought
i. Plaintiffs AND defendants can transfer
ii. If there is a transfer like this, the law runs with the case
1. Ex. If the suit is filed in Mississippi, and then transferred to
Pennsylvania, Mississippi law will apply in the Pennsylvania court
b. 28 U.S.C. 1406—A district court in which a case of improper venue filed may dismiss
the case or, if it be in the interest of justice, transfer the case to ANY district in which it
could have been brought.
c. 28 U.S.C. 1631—Provides that when venue is proper but jurisdiction is lacking, a court
without jurisdiction can transfer the case to any other court in which the action could
have been brought at the time it was originally filed
i. Can also do “in the interests of justice”
ii. Date of filing is retroactive to date of filing in original court

4. Forum Non Conveniens (28 U.S.C. 1404)

a. A motion to dismiss the lawsuit
b. Plaintiff has done everything right
c. When you CANNOT use a transfer statute, use forum non conveniens
d. A court may dismiss a case on grounds of forum non conveniens only where;
i. 1. Another court has jurisdiction to hear the case (an alternative forum); AND
ii. 2. The cause of action has no substantial connection with the state in which the
court sits
e. Private Interest Factors: If a plaintiff’s choice of forum substantially burdens a
defendants ability to put forward witnesses and evidence, the court will be more inclined
to grant a forum non conveniens dismissal;
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ii. Availability of compulsory process for attendance of unwilling, and cost of

obtaining attendance of willing witnesses
iii. Possibility of view of the premises
iv. All other practical problems that make trial of a case easy, expeditious and
inexpensive
f. Public Interest Factors
i. Administrative difficulties flowing from court congestion
ii. Local interest in having localized controversies decided at home
iii. Interest in having trial of a diversity case in a forum that is at home with the law
that must govern the action
iv. Avoidance of unnecessary problems in conflict of laws, or in the application of
foreign laws
v. Unfairness of burdening citizens in an unrelated forum with jury duty

_____________________________________________________________________________________

THE ERIE DOCTRINE (What Law Applies?)

1. In Federal Court diversity cases (state or federal law?)
2. Rules of Decision Act (28 U.S.C. Sec. 1652)
a. The laws of the several states, except where the Constitution, treaties, or statutes of the
United States otherwise require or provide, shall be regarded as rules of decision in trials
at common law, in the courts of the United States, in cases where they apply
b. Swift v. Tyson was the case that started the problem
i. The judge there (Justice Story) allowed for federal courts to make up their own
common law where state law did not apply
ii. This resulted in “forum shopping”
c. Erie v. Tompkins
i. Reversed Swift v. Tyson
ii. Abolished federal general law
iii. In diversity cases, federal court is to apply the same state law that a state court
hearing case would apply
iv. RULE: In diversity cases, the federal court is to apply State substantive law and
the Federal procedural law.
1. Substantive Issues
a. Whether the plaintiff has a cognizable cause of action, and
b. Whether applicable substantive defenses block the suit
2. Procedural Issues
a. Do not address whether the plaintiff has a cognizable claim or
defendants a defense
b. Procedure governs the way plaintiffs and defendants must
present sides of the case to the court
d. Who decides what is Substantive vs. what is Procedural?
i. Guaranty Trust v. York
1. Directed federal courts to use state procedures whenever choice of
procedure would determine the outcome of the case
ii. Byrd
1. Outcome determinative test AND balancing of State and Federal
interests
e. Conflict of Laws
i. Hannah
1. Federal rules will prevail over state rules if there is a conflict

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_____________________________________________________________________________________

PLEADINGS
1. The Complaint
a. Requirements (FRCP 8)
i. Statement of Subject Matter Jurisdiction
1. Short, plain statement providing grounds for court’s jurisdiction
ii. Statement of the Claim
1. Short, plaint statement of claim showing pleader entitled to relief
a. Detailed factual allegations are not required, but the Rule does
call for sufficient factual matter, accepted as true, to “state a
claim to relief that is plausible on its face.”
iii. Demand for Judgment
1. Relief the pleader seeks (usually money)
b. Special Pleading Requirements (FRCP 9)
i. In all averments of fraud or mistake, the circumstances constituting fraud or
mistake shall be stated with particularity
1. Ensures that the defendant has fair notice of the claim
2. Helps safeguard the defendant against spurious accusations
2. Defendant’s Respons e
a. Pre-Answer Motion to Dismiss
i. Defendant has 21 days to do this
1. Motion for More Definite Statement
2. Motion for Judgment on the Pleadings
3. Motion to Strike
b. Answer
i. The defendant must respond to all of the numbered paragraphs in the complaint
ii. He can do these things;
1. Admit the allegation
2. Deny the allegation
3. Say that you don’t have enough information to form a belief as to the
truth (this will be deemed a denial)
4. The defendant can also make an affirmative defense
a. Affirmative defenses must be pled in a party’s first responsive
pleading, or else are waived
b. An affirmative defense is an assertion by the defendant, that if
true, defeats the plaintiff’s claim
c. The defendant has the burden of proving an affirmative defense
i. Examples: accord and satisfaction, assumption of risk,
duress, fraud, illegality, res judicata, statute of frauds,
statute of limitations, waiver, release…
c. Rule 12 Defenses
i. Under Rule 12(b), all legal and factual defenses must be asserted in first
responsive pleading (Answer, unless amended under Rule 15). However, seven
defenses may alternatively be made by motion
1. Lack of SMJ
2. Lack of PJ
3. Improper Venue
4. Insufficiency of Process
a. Something is wrong with the paperwork

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5. Insufficient Service of Process

6. Failure to state a claim upon which relief can be granted
a. “In determining the merits of a 12(b)(6) motion, a court must
assume that all of the factual allegations of the complaint are
true. A court should not dismiss a complaint for failure to state a
claim unless it is clear that the plaintiff can prove no set of facts
in support of his claim which would entitle him to relief.”
7. Failure to join a necessary party under Rule 19
d. Waivable Defenses
i. If you don’t assert these defenses in your initial response, they are waived
1. Lack of Personal Jurisdiction
2. Improper Venue
3. Insufficiency of Process
4. Insufficient Service of Process
3. Service and Filing (FRCP 5)
a. Purpose of the Rule: to ensure that each party obtains a copy of all documents used to
prosecute and defend the action (To create a rationally-assembled record with the clerk of
the court).
b. Every party who has entered an appearance must be served with a copy of the following
i. All pleadings after the complaint
ii. All discovery papers
iii. All written motions
iv. All orders required to be served
v. All other appropriate legal papers
c. Service of papers are generally made on each party’s attorney, not on the party
d. Methods of Service
i. Personal delivery
ii. Service by mail
iii. Service by other agreed means
iv. If address unknown, leave with clerk of court
4. Computation of Time (FRCP 6)
a. Counting begins the day after the triggering event
i. Ex. The complaint is filed
b. The time period is extended if the last day is a weekend or a holiday
c. Can also be extended for inclement weather
d. Weekends and holidays aren’t included if the time period is 10 days or less
e. If party served by mail, add 3 days
f. Last day…
i. Unless a different time is set by statute, local court rule or court order, the last
day ends…
1. For electronic filing, at midnight in the court’s time zone.
2. For filing by other means, when the clerk’s office is scheduled to close.
5. Amendments (FRCP 15)—Amendments are freely granted in the interest of justice
a. Amendment as a Matter of Choice
i. A party may amend once as a matter of course (without court permission)
1. Before responsive pleading is served; or
2. Within 21 days of service if no responsive pleading is required
ii. Must respond to amended pleading within original time for response or 14 days
after service, whichever is longer
iii. Once the “amendment of right” period has passed, party must obtain leave of the
court to amend – Leave to amend shall be freely granted

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iv. Amendment may be denied if it is…

1. Unreasonably dilatory (it’s been way too long)
2. Futile (not a cognizable claim)
3. In bad faith
4. Unduly prejudicial to the opposing party
b. Amendment to Conform to the Evidence
i. Amendments to conform to the evidence are usually made during or after the trial
1. Can be made by consent of the parties
2. Can be made over objection of the party where;
a. Presentation of merits will be served
b. Objecting party cannot show prejudice
3. Can be denied on grounds of bad faith, undue delay, unfair prejudice, or
futility
c. Relation Back (to cure a Statute of Limitations problem)
i. Statute of Limitations itself
1. When the applicable SOL expires between the date of an original
pleading and the date of a proposed amendment, is the amendment time-
barred, or does it relate back?
2. Relation Back: Does the proposed amendment take the date of the
original pleading?
a. If SOL governing the cause of action permits relation back of
amended pleadings, then relation back is permitted
b. Only applies if the SOL is more generous to amended pleading
than Rule 15(c)
ii. Transactional Relationship Test
1. Permits relation back if the amended claim or defense arose out of the
same transaction or occurrence as that set forth in the original pleading
2. Critical Issue: Whether the original complaint gave notice to the
defendant of the claim later asserted by the amendment
a. NOTE: These tests are only an issue if the Amendment falls
outside the SOL
iii. Amendment Amending Parties
1. Concerns the relation back of amendments amending parties
2. When the new party is a defendant, relation back is more likely to be
prejudicial than relation back of new claim against an original defendant
3. Relates back if;
a. Arises out of the same transaction or occurrence as set out in the
original pleading
b. Defendant was served within the 120 day time period
c. The party added knew, or should have known that the action
would have been brought against him, but for a mistake in the
identity
i. Ex. Plaintiff v. Eminem—Must sue Marshall Mathers,
not “Eminem”
d. Supplemental Pleadings
i. Sets forth events occurring after pleading is filed
ii. Does not include facts that occurred before original filing, but discovered after
filing
1. NOTE: You are simply UPDATING the lawsuit

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6. Dismissals (FRCP 41)

a. Voluntary Dismissal (plaintiff voluntarily dismisses the lawsuit)
i. By notice of Dismissal
1. If the defendant has not yet filed responsive pleading
2. Dismissal is achieved by filing notice of dismissal, not by motion, and no
court order is required
3. Notice is effective when filed, but must be served on all parties
4. Unilateral dismissal by plaintiff governed by the Two Dismissal Rule;
a. First voluntary dismissal is without prejudice [no bar to re-
filing]
b. Second voluntary dismissal is with prejudice, acts as a final
adjudication on the merits and will preclude a third action from
being filed
c. This rule only applies to 2 dismissals by notice
ii. By Stipulation
1. Plaintiff may dismiss action without consent of the court by stipulation
of all parties who have appeared in the action
2. Dismissals by stipulation are presumed without prejudice UNLESS
specified otherwise
3. Voluntary dismissal leave situation as if the lawsuit was never filed
a. You must get permission from the other party
iii. By Court Order
b. Involuntary Dismissal (against the plaintiff’s wishes)
i. Failure to Prosecute
1. If the plaintiff doesn’t work on his case at all
2. Plaintiff doesn’t serve summons and complaint, or tell the court that he
has
ii. Judicial Sanction
1. Plaintiff didn’t do something he was supposed to do (malpractice)
a. These are presumed with prejudice (the plaintiff won’t be able to
file the suit again)
7. Default (FRCP 55)
a. Entry of Default
i. Two requirements
1. Party against whom judgment sought fails to plead or otherwise defend
as provided by these rules; AND
2. That fact is set forth in an affidavit
b. Default Judgment (getting your $$)
i. By the Clerk—When plaintiff’s claim is for a sum certain or for a sum which can
by computation be made certain upon request of plaintiff and upon affidavit of
amount due shall enter judgment for that amount and costs against defendant if;
1. Defendant has been defaulted for failure to appear, and
2. Defendant is not an infant or incompetent person
ii. By the Court: In all other cases, party entitled to judgment by default shall apply
to the court
1. If the party has appeared in the action, the party shall be served with
notice of the application for default judgment at least 7 days before
hearing
2. Court may conduct evidentiary hearing on issue of damages
8. Motion for Relief from Judgment (FRCP 60)
a. Motion for relief from judgment because the judgment is void

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9. Rule 11
a. Substance of Rule
i. This rule is basically designed to protect against frivolous lawsuits.
ii. Applies to both parties and lawyers
iii. The rule usually only applies to written documents
1. However, there are times when it can apply to verbal statements
a. Ex. A lawyer submits a claim, but after it is submitted he finds
evidence contrary to what the claim stated. If he still argues that
point, knowing that it is false, he can be subject to Rule 11
sanctions
iv. The standard is not what the lawyer actually believed that mattered, but what he
should have believed as a competent attorney after performing a reasonable
inquiry
b. Procedural Requirements
i. Signature—Every pleading must be signed by the attorney, or if the party is not
represented by an attorney, must be signed by the party
ii. Representations to the Court—By presenting a pleading to the court, the attorney
or party is certifying that;
1. The suit is not being filed for any improper purpose
2. The claims asserted are supported by law, or there are reasonable
grounds to establish new law
3. There is evidence to support the claim
4. Denials have evidentiary support or there is a lack of information to
make a proper defense
iii. Sanctions
1. Currently it is not mandatory that sanctions be given
2. A party against whom a Rule 11 motion is made has a 21 day “safe
harbor” period in which he can withdraw or modify the pleading in order
to avoid the sanction
3. Normally, if sanctions are given, they will be for attorney’s fees
10. Joinder
a. Joinder of Claims by Plaintiff (FRCP 18) aka Permissive Joinder
i. Plaintiff can join any and all claims against a defendant
ii. Claims DON’T have to be related
iii. There is no Compulsory Joinder
iv. The claims must satisfy;
1. PJ
2. SMJ
3. Venue
v. This rule allows joining 2 claims even when 1 must be decided before the other
b. Counterclaims (FRCP 13) aka Joinder by Defendant
i. This kind of claim goes back “across the v”
ii. There are 2 types of counterclaims;
1. Compulsory (Rule 13(a))
a. Arises from the same transaction or occurrence that gave rise to
the plaintiff’s complaint (has an automatic ticket to defend
against the claim – P consents to PJ)
i. Must be asserted or it is waived (use it or lose it!)
ii. Must satisfy PJ and SMJ, but NOT Venue
iii. SMJ is present because SCNOOF
1. Exceptions

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a. Immature Claims
b. Lawsuits pending in another court
2. Permissive (Rule 13(b))
a. Does not arise from the same transaction or occurrence that gave
rise to the plaintiff’s complaint, or fall into one of the exceptions
noted in Rule 13(a).
i. Defendant can bring in same lawsuit or in a separate
action
ii. Must satisfy PJ and SMJ; There is a split of authority on
the need to satisfy Venue
1. Defendant would have to have either a federal
question or diversity jurisdiction in order to
satisfy SMJ
b. Federal Courts have supplemental jurisdiction over compulsory
counterclaims, but permissive counterclaims require their own
jurisdictional basis
c. Cross Claims (FRCP 13)
i. A claim that is filed against a party who is on the same side of the V
1. Ex. Plaintiff sues 2 defendants and then one of the defendants sues the
other
ii. Claim is against a co-party
iii. Unlike compulsory counterclaims, cross claims are always permissive
iv. There is no such thing as a compulsory cross-claim
1. Must arise out of the same transaction or occurrence as original action
2. Can be brought only if at least one cross claim defendant is already a
party to the action
3. Must meet requirements of SMJ and PJ, but NOT Venue
d. Limitations Under 28 U.S.C. 1367(b)
i. Courts have jurisdiction over claims that are based on diversity jurisdiction, but
not over claims by plaintiffs against persons made parties under Rule 14 or 20
e. Joinder of Parties
i. By Plaintiff (FRCP 20)
1. Two requirements;
a. Persons joined must have claims that arise out of the same
transaction or occurrence, or series of transactions or
occurrences; AND
b. All parties joined must have at least 1 question of law or fact in
common
ii. Limitations Under 28 U.S.C. 1367(b)
1. Courts don’t have supplemental jurisdiction over claims by plaintiffs
against persons made parties under Rule 20
f. Third Party Joinder (FRCP 14)
i. Defendant is seeking “indemnification”
ii. A party who seeks to join another defendant to the lawsuit is called a “3rd party
plaintiff” (Impleader)
iii. Person joined is called a “3rd party defendant”
iv. Someone is asserting a claim against someone NOT already a party to the suit
v. Defendant must draft a 3rd party complaint and serve the 3rd party with process to
bring into the suit
1. Defendant (3rd party plaintiff) isn’t saying, “It’s him, not me,” but rather,
“if me, then he owes me.”

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CIVIL PROCEDURE II OUTLINE

Professor Monica Navarro, Hilary Term 2011

SUPPLEMENTAL JURISDICTION (applies only to Diversity Jurisdiction)—where there is at least one

claim sufficient to confer subject matter jurisdiction (anchor claim), the federal court can exercise
“supplemental jurisdiction” over additional jurisdictionally insufficient state law claims if requirements of
28 U.S.C. §1367 are satisfied.

1. 28 U.S.C. §1367
a. Step One: 28 U.S.C. §1367(a) “SCNOOF”
i. Does the jurisdictionally insufficient claim arise out of the same common
nucleus of operative fact?
1. Are the claims so related that they form part of the same case or
controversy? Do they arise from the same transaction or occurrence?
2. If no, THEN NO supplemental jurisdiction
3. If yes, proceed to 1367(b)
b. Step Two: 28 U.S.C. §1367(b)
i. Courts have original jurisdiction over claims that are based on diversity
jurisdiction, so you must look at 1367(b) when the original claim gets its ticket
through diversity jurisdiction.
1. If you claim is based on federal question jurisdiction, you don’t even
have to look at this step
ii. If the claim is seeking to be joined by a defendant, the claim will be allowed
iii. Four Steps you must look at to determine if the claim will be allowed “DPJD”
1. Is the first claim (anchor claim) based on diversity jurisdiction?
2. Is the claim that you are seeking to join being filed by a plaintiff?
3. Is the claim being brought against parties joined under FRCP 14, 19,
20, 24?
a. Against a party joined
i. If the claim is being joined against (i.e. across the “v”)
parties joined, the claim won’t be allowed
ii. If the claim is joined by parties joined, then it will be
allowed (and ignore amount in controversy requirement)
4. Does the claim destroy diversity jurisdiction?
iv. If the claim is not excluded by 1367(b), then it will be allowed
c. Step Three: 28 U.S.C. §1367(c)
i. Even if the proposed supplemental claim passes the tests laid out in 1367(a) and
(b), the Federal Court may still decline to exercise jurisdiction where…
1. The supplemental claim raises novel or complex issues of state law
2. The supplemental claim substantially predominates over the federal
claim
3. The court has dismissed all federal claims, OR
4. For other compelling reasons
JOINDER
11. Joinder of Claims by Plaintiff (FRCP 18—Permissive Joinder)
a. Plaintiff can join any and all claims against a defendant, even if the claims are unrelated.
b. FRCP 18 is permissive; you don’t HAVE to bring the claims (there is no Compulsory
Joinder)
c. The claims must satisfy;
i. PJ, SMJ, and Venue
d. This rule allows joining 2 claims even when 1 must be decided before the other

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12. Counterclaims (FRCP 13—Joinder by Defendant)

a. This kind of claim goes back “across the v”
b. There are 2 types of counterclaims;
i. Compulsory (Rule 13(a))
1. Arises from the same transaction or occurrence that gave rise to the
plaintiff’s complaint (has an automatic ticket to defend against the claim
– P consents to PJ)
a. Must be asserted or it is waived (use it or lose it!)
b. Must satisfy PJ and SMJ, but NOT Venue
c. SMJ is present because of SCNOOF
i. Exceptions
1. Immature Claims
2. Lack of jurisdiction over 3rd Parties
3. Lawsuits pending in another court (these will
turn the counterclaim into a permissive one)
ii. Permissive (Rule 13(b))
1. Does not arise from the same transaction or occurrence that gave rise to
the plaintiff’s complaint, or falls into one of the exceptions noted in Rule
13(a).
a. Defendant can bring in same lawsuit or in a separate action
b. Must satisfy PJ and SMJ (there is a split of authority on the need
to satisfy Venue).
i. Defendant would have to have either a federal question
or diversity jurisdiction in order to satisfy SMJ
2. Federal Courts have supplemental jurisdiction over compulsory
counterclaims, but permissive counterclaims require their own
jurisdictional basis
13. Cross-Claims (FRCP 13(g))
a. A claim that is filed against a party who is on the same side of the “v”
i. Ex. Plaintiff sues 2 defendants and then one of the defendants sues the other
b. Claim is against a co-party
c. Unlike compulsory counterclaims, cross claims are always permissive
d. There is no such thing as a compulsory cross-claim
i. Must arise out of the same transaction or occurrence as original action
ii. Can be brought only if at least one cross claim defendant is already a party to the
action
iii. Must meet requirements of SMJ and PJ, but NOT Venue
14. FRCP 13(h)
a. Permits joinder of persons not yet parties to a counterclaim or cross-claim where the
joinder of such persons will satisfy the requirements of FRCP 19 or FRCP 20.
i. This applies to counterclaims and cross-claims
1. Example—a bank is suing the wife over a claim regarding the house she
owns. However, the husband owns the title to the home; therefore, the
bank needs to include the husband in the claim.
b. Must be SMJ over claim against party to be joined and PJ over party to be joined. Venue
requirements do not apply.
15. Joinder of Parties (FRCP 20)
a. Two Requirements
i. Persons joined must have claims that arise out of the same transaction or
occurrence, or series of transactions or occurrences; AND
ii. All parties joined must have at least one question of law or fact in common

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b. Once these rules are met, you must find PJ, SMJ, and Venue
16. Third Party Joinder (FRCP 14—Impleader)
a. Defendant is seeking “indemnification” or “contribution”
b. Claim must be “derivative” and has to arise out of the same nucleus of facts (SCNOOF)
c. FRCP 14 is always permissive
d. Person seeking to join another defendant is called a “3rd party plaintiff” (Impleader)
e. Person joined is called a “3rd party defendant”
f. Someone is asserting a claim against someone NOT already a party to the suit
g. Defendant must draft a 3rd party complaint and serve the 3rd party with process to bring
into the suit
i. Defendant (3rd party plaintiff) isn’t saying, “It’s him, not me,” but rather, “if me,
then he owes me.”
h. Must satisfy PJ and SMJ, but NOT Venue
i. Once in the case…
i. 3rd party defendant can file claims against defendant
ii. 3rd party defendant can file claims against plaintiff
1. Any defense that the 3rd party plaintiff (original defendant) has to
Plaintiff’s claims.
2. Any claim arising out of the same transaction or occurrence as
Plaintiff’s original claims in the action.
iii. Plaintiff can file claims against the 3rd party that arise out of the same transaction
or occurrence.

17. When facing a Joinder problem on the EXAM, go through the two-step analysis
a. Step One—are the joinder rules satisfied?
b. Step Two—is there PJ, SMJ, (and sometimes Venue)?
i. If SMJ is only met through Supplemental Jurisdiction, do 1367 analysis

18. Compulsory Joinder (FRCP 19-“Required Joinder of Parties”)

a. This rule is used strategically by defendants in an attempt to get a case dismissed
i. Step 1: Is the Absentee a “necessary” party because…
1. Court would not be able to grant complete relief to existing parties
without absentee being present; OR,
a. This step focuses on whether the substantive law allows the party
to get complete relief
2. Absentee has an interest in subject matter of the case and disposition of
the case without him might impair/impede his ability to protect that
interest; OR,
a. Will some legal right be taken away from the absentee if the case
proceeds without him?
3. Absentee has an interest in subject matter of case and disposition without
him might leave existing parties subject to multiple liability or
inconsistent obligations.
a. Look to see if one of the existing parties will be subject to other
judgments
 If the answer to any of these questions is yes, then the Absentee will be
found to be a necessary party and they must be joined if joinder is
feasible (note—joint tortfeasor is permissive, see Temple).
ii. Step 2: Is joinder of the Absentee “feasible”?
1. Is there SMJ if the Absentee becomes a party?
2. Will the court be able to exercise PJ over the Absentee?

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a. If yes to the above, Absentee must be joined (but may be

dismissed if he makes a proper Venue objection). If no, then go
to step 3.
iii. Step 3: Is absentee an “indispensable party,” requiring dismissal?
1. Decision Factors
a. How much will the absence of the Absentee prejudice him or
existing parties?
b. Can the court lessen prejudice by some protective provision in
the judgment?
c. Will the judgment rendered for the plaintiff without the Absentee
be “adequate”?
d. Will the plaintiff have an adequate remedy if the court dismisses
the action? Is there another forum?
iv. When you get a Rule 19 question on the exam, you must perform a separate
analysis for each party in question. You must then go through each factor of the
3-Step analysis
19. Intervention (FRCP 24)
a. Intervention of Right (24(a)) [hardly tested on for exam purposes]
i. A person can Intervene where…
1. A Federal statute confers an unconditional right to Intervene; OR,
2. A Person can satisfy 3 requirements:
a. Significant interest in subject of litigation; and,
i. Has to be some legal right at stake
b. Substantial risk that litigation will impair interest; and,
c. Existing parties do not adequately protect interest.
i. This is easy for the Absentee to prove
 Applicant must prove all 3 of these
b. Permissive Intervention (24(b))
i. A person may move the court for leave to Intervene when…
1. A Federal statute confers an unconditional right to intervene; OR,
2. Applicant’s claim or defense and the main action have a question of law
or fact in common
a. Supplemental jurisdiction is NOT available for permissive
intervention (most have federal question or diversity); intervenor
consents to PJ.
c. Rule 24 motion must be “timely.” Court considers:
i. Length of delay in seeking intervention
ii. Prejudicial impact of delay on existing parties
iii. Prejudice to Intervenor if the Intervention is denied
iv. Other factors affecting fairness
d. Court has discretion to deny the motion if intervention will unduly delay or prejudice
pending litigation
e. In deciding whether to allow a party to Intervene as a plaintiff or a defendant, courts have
an obligation to align parties in accordance with their interest in the litigation
f. The courts must look beyond the pleadings and arrange the parties according to their
sides in the dispute
g. In order for parties to be considered “opposing parties,” they must have a collision of
interests over the principal of the suit
h. Strangers to a lawsuit are not bound to Intervene in a lawsuit, even if their rights are
going to be effected (Martin v. Wilks)
i. They must be joined by the party filing the suit to be bound to the decision.

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ii. Exception—discrimination cases

20. Interpleader (FRCP 22 and Statutory)

a. Permits a stakeholder who might be subject to multiple liabilities by claimants to join
claimants as defendants in a single action
b. Purpose: To prevent multiple judgments against the stakeholder that exceed the value of
the stake
c. 2 Kinds of Interpleader
i. Rule 22 Interpleader
1. Normal requirements for PJ, SMJ, and Venue must be satisfied
a. Vertical Diversity: Citizenship of the plaintiff and all claimants
must be diverse
i. Example—Plaintiff (MI) v. 3 defendants (all from OH)
b. Amount in controversy must exceed $75,000
c. Supplemental jurisdiction is NOT available under Rule 22
Interpleader
d. Venue: 28 USC §1391 applies
i. As long as you have PJ over at least one of the
defendants, you will have Venue
ii. Statutory Interpleader (28 USC 1335, 1397, and 2361)
1. Also need PJ, SMJ, and Venue, but….
a. PJ: Nationwide service of process
i. Courts have PJ over a defendant in ANY state
b. Horizontal (Minimal) Diversity: Citizenship of one claimant
must be diverse from any other; amount in controversy must
only be over $500
i. Plaintiff (MI) vs. 3 defendants, (2 from MI, and 1 from
OH)
1. At least one claimant is diverse from another
c. Venue: In any district where any claimant resides
d. Rule 22 and Interpleader statutes require the plaintiff to plead that competing claims are
at least partly inconsistent with one another
e. Interpleader actions do NOT need to be based on identical competing claims or claims
with a common origin, nor do they need to be totally incompatible with each other
i. You can combine the two rules if you have to in order to interplead 2 or more
people
21. Class Actions (FRCP 23)
a. Allows adjudication of large numbers of claims in one action
b. Designates a party to litigate not only on his own behalf, but also as a representative for a
group of people, or a “class”
c. Only the class representative is active in the case, but all class members are bound by the
outcome
d. Class actions get around due process requirements by imposing very strict requirements
for certification
e. Most class actions are typically plaintiffs, but there are class defendants on some
occasions
f. In order to be certified as a class action, a case must:
i. Conform to the 4 Requirements of Rule 23(a)
1. Numerosity (a)(1): Class must be sufficiently large as to render joinder
impracticable

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2. Commonality (a)(2): There must be questions of law or fact in common

to the class members, the resolution of which will advance the litigation
3. Typicality (a)(3): Claims of class representatives must be typical of the
claims of the class
a. This requirement is usually easy to meet
4. Adequacy of Representation (a)(4): Class reps must have interests in
common with the class and must vigorously prosecute those interests
through qualified counsel
a. Courts want to make sure that the class reps don’t have an
interest that is adverse from the rest of the class
b. Courts want to make sure that the lawyer is capable and qualified
of handling a large class action suit
c. This requirement is usually the most difficult to meet, and courts
usually look into this a lot
ii. Fit into one of the 4 categories of Rule 23(b)
1. 23(b)(1)(A): Risk of Incompatible Duties for Class Opponent
a. Court looks to see if the relief being sought has a likelihood of
imposing inconsistent standards (or obligations) unless it is
certified as a class action
i. Ex. Environmental contamination of land
1. Class action plaintiffs are all landowners within
6 miles of a plant. Plaintiffs are seeking cleanup
and emission standards for the defendant. If
they were all seeking different types of
standards, defendant would be exposed to all
kinds of different relief requests by the different
plaintiffs.
2. 23(b)(1)(B): Risk of Practical Impairment of Non-Parties’ Interests
a. Focuses on the impact on the plaintiffs
i. Ex. A fixed (or limited) fund
1. You want to make sure that everyone gets some
of the money
a. Plaintiffs want to be either a (b)(1) or
(b)(2) party
3. 23(b)(2): Classes seeking Equitable Relief
a. This one is usually seeking injunctive relief
4. 23(b)(3): Predominance of Common Legal or Factual Questions
a. The party is looking for money here
b. This is the toughest to pursue because there are additional
requirements
i. Common issues must predominate over individual
interests
ii. Class action must be the “superior” means of
adjudicating the case
iii. 4 Factors the Court will look at:
1. Individual interests in separate actions
a. Are there people out there already suing
the defendant?
2. Pending Litigation
a. Kind of the same as above
3. Desirability of keeping litigation in one forum

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4. Difficulties in managing the class action

iii. Satisfy 2 Additional Common Law Requirements
1. The class must be capable of definition
2. The representative must be a member of the class
g. Requirements of Rule 23(c)
i. Court must determine whether to certify class “at an early practicable time”
ii. Order certifying class must:
1. Define class and class claims, AND
2. Appoint class counsel
iii. Permits court to direct notice to (b)(1) and (b)(2) class members
1. Court doesn’t have to do this. It is discretionary
iv. Requires that notice and the opportunity to “opt out” be given to (b)(3) class
members
1. Notifies class members that if they don’t decide to opt out, they will be
bound by the decision
h. Rule 23(e)
i. Court must approve any settlement or voluntary dismissal
1. Must conduct a “fairness hearing” to ensure that resolution that will bind
class members is fair, reasonable, and adequate
a. This is done after the class is certified
i. Rule 23(f)
i. Class certification decision is subject to immediate appeal, at discretion of the
Appellate Court
j. Rule 23(g)
i. Class Counsel
1. Class counsel must fairly and adequately represent the interests of the
class
2. In appointing class counsel, court must consider:
a. Work performed regarding to claims in action
b. Experience in handling class actions, other complex litigation,
and claims involved in the case
c. Knowledge of applicable law
d. Resources counsel will commit to class action
e. Other matters bearing on ability to fairly and adequately
represent the class
k. Hansberry v. Lee
i. If a class action is adequately maintained, (if it adequately protects the interests
of the Absentee parties), the absent members of the class will be bound by the
judgment
l. Phillips Petroleum
i. Forum state may exercise PJ over claim of absent class action plaintiffs even
though those plaintiffs may not pass minimum contacts test normally applied to
defendant, provided that:
1. Plaintiff is provided with notice and opportunity to be heard
2. Plaintiff is provided with the opportunity to “opt out”
3. Absent plaintiff is adequately represented by class reps
m. Class Actions Must Satisfy PJ:
i. Plaintiff Classes: Where class members can opt out, court has PJ even if class
members have no link to the forum state
ii. Defendant Classes: PJ must be acquired over each defendant class member
n. Class Actions Must Satisfy Venue:

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i. Venue rules apply to class actions in same way that they apply in conventional
litigation, EXCEPT:
1. Where venue is based on residence, and case involves defendant class,
only residence of class reps are examined, not residence of entire class
o. Class Actions Must Satisfy SMJ:
i. Diversity Jurisdiction:
1. Looks only at citizenship of class reps, which must be diverse from
opposing party
a. EXXON: As long as one named plaintiff satisfies the amount in
controversy, court can use supplemental jurisdiction to hear
claims of other plaintiff class members that do not satisfy the
amount in controversy
ii. Federal Question Jurisdiction
1. Normal application
p. Class Action Fairness Act (2005) (CAFA)
i. Federal Court has SMJ over class actions involving state law claims where
1. There are 100 or more class members
2. The aggregate amount in controversy is in excess of $5 Million, AND
3. There is “minimal” diversity (ex. at least 1 defendant and 1 plaintiff
class member are diverse from each other)
q. Class Action Requirements for Settlement
i. Requirements for Rule 23(a) must still be met when the goal is settlement
_____________________________________________________________________________________

FORMER ADJUDICATION (aka Preclusion)

1. Precludes claims and issues that were already litigated from being litigated again
2. A “Common Law” Doctrine
a. Purpose of the Doctrine
i. Judicial Economy
ii. Consistent Judgments
iii. Prevent Harassment of Defendants
iv. Finality of Judgments
3. Two Types of Preclusion
a. Res Judicata / Claim Preclusion—Final judgment on the merits precludes the same
parties and those in privity (closely related to them) from litigating the same (or
sufficiently similar) claim in a later lawsuit
i. 3 Requirements
1. Same (or substantially similar) claim
a. Transaction Test
i. Precludes claims arising out of the same transaction as
the 1st suit (same common core of operative facts)
1. Most states use this test
b. Same Evidence Test
i. Precludes claims that are supported by the same
evidence as claims asserted in the 1st action
c. Primary Rights Test
i. Precludes claims that arise out of the same “primary
right” as claims asserted in 1st action
1. This is the minority view (Cali)

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2. Same parties (or parties in “privity) with one another

a. Doctrine precludes relitigation of claims between the same
parties or their privies
i. Party is in Privity with another when
1. He has the same legal interest as the party to the
1st suit
2. His legal rights relative to that interest were
litigated in the 1st suit, such that he was
adequately represented
ii. 3 Types of Privity Relationships:
1. Relationships between owners of successive
interests in real or personal property
2. Relationships that intertwine the substantive
legal interests of a party and a non-party
3. Relationships between the party and non-party
that are representational in nature
4. Ex. Trustee and beneficiaries of a trust
5. Ex. Minor and guardian
6. Ex. Class rep and absent class member
3. Valid Final Judgment on the Merits
a. Valid Final Judgment
i. Judgment is generally deemed “valid” if the defendant
had proper notice, and the court had SMJ and PJ [but see
Rule 60(b)]
ii. Judgment is “final” when no further action need be
taken in the case by the trial court
1. Judgment may be “final” even though an appeal
is pending (except in Cali)
2. A judgment on a jury verdict would be
considered “final”
b. On the Merits
i. FRCP 41(b): Unless the dismissal order says otherwise,
dismissals for (1) lack of jurisdiction, (2) improper
venue, or (3) failure to join a necessary party (under
Rule 19) are not adjudications on the merits (as well as
failing to amend complaint for failure to state a claim)
ii. Voluntary dismissals without prejudice or dismissals on
the grounds of prematurity are not judgments “on the
merits”
1. Unless there are 2 voluntary dismissals. Then it
will be treated as “on the merits”
iii. Court may treat judgment as “on the merits” because it is
fair to put “teeth” into sanctions
ii. Limitation on the Doctrine
1. Claims which could not have been brought in the 1st action – due to
limitations of the court, immaturity of claim, or other reason – will not be
barred by claim preclusion
iii. Which Law Controls
1. Where 1st judgment is rendered by:
a. State Court: State law governing 1st suit controls (full faith and
credit clause)

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b. Federal Court (Fed. Ques. Jurisdiction):

i. Federal Common Law controls
c. Federal Court (Diversity Jurisdiction):
i. State law within which 1st court sits controls, absent
countervailing federal interests (Semtek)

b. Collateral Estoppel / Issue Preclusion

i. Determination of an issue of fact OR law in one lawsuit is conclusive in a
subsequent action, whether on the same or different claim, where…
1. Issue of fact or law is identical in both lawsuits
a. Unlike Res Judicata, determination of whether 2 issues are the
same depends on straightforward analysis of
i. Factual identity of the issues
ii. Identity of applicable legal standards
iii. Burden of proof applicable to the 2 actions
1. If the burden of proof is different in the 2
actions, it doesn’t necessarily mean that Issue
Preclusion won’t bar the 2nd suit
2. You have to look at which burden of proof was
more difficult to meet, and if it was met, then
Issue Preclusion will bar the 2nd claim
b. Lumpkin v. Jordan
i. Application of Collateral Estoppel does not depend on
an analysis of whether the prior decision was right or
wrong
ii. Like Res Judicata, one doesn’t consider the merits of the
case in determining whether Collateral Estoppel should
apply
2. Issue was fully litigated and decided in 1st action
a. Issue to be precluded must be actually raised, litigated, AND
decided in 1st action
i. A matter is actually litigated where the parties formally
opposed each other on the issue at some point in the
litigation and submitted the issue to the court for
resolution
3. Issue was determined by a valid and final judgment
a. FRCP 49(a): Special Verdict
b. FRCP 49(b): General Verdict with Interrogatories/Questions
c. FRCP 52(a): Findings and Judgment of Court in Bench Trial
i. Illinois Central v. Parks
1. Where a judgment could have been based on the
determination of any one of two or more issues
of fact or law, the party seeking to plead
Collateral Estoppel based on one of these issues
must prove that the judgment was actually
based on the determination of THAT issue
2. This is basically the same analysis you would go
through for Claim Preclusion
3. You are looking to see if the court had
jurisdiction and whether the judgment was final

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4. Determination of the issue was necessary to the judgment in the 1st

action
a. Test: If the issue had been decided the opposite way, would the
same judgment have been entered?
i. If yes, determination of the issue is NOT necessary to
the judgment
b. Alternative Grounds:
i. If unclear which issue supports judgment, neither is
given issue preclusive effect
ii. Even if clear that both support judgment, ground is given
Claim Preclusive effect only if upheld on appeal as
sufficient basis to support judgment
ii. Mutuality Doctrine
1. Permitted use of preclusion doctrine only between same parties
a. Rationale: Since the party to the 1st lawsuit could not assert
judgment against non-party, non-party can’t assert the judgment
against party
b. Problems:
i. Operates in favor of prior parties
ii. Sacrifices judicial economy
iii. Raises possibility of inconsistent results
c. In 1942, Bernhard v. Bank of America began moving away from
the Mutuality Doctrine
d. The doctrine was abandoned by the Court in Blonder-Tongue
Laboratories, Inc. v. University of Illinois Foundation (1971).
iii. Defensive Collateral Estoppel
1. Defendant in 2nd lawsuit uses prior judgment in 1st suit defensively
against the plaintiff in the 2nd suit (i.e. a plaintiff was estopped from
asserting a claim that the plaintiff had previously litigated and lost
against another defendant).
a. This is always allowed
iv. Offensive Collateral Estoppel
1. Plaintiff in 2nd suit uses prior judgment in 1st suit offensively against the
defendant in the 2nd suit (i.e. a plaintiff is seeking to estop a defendant
from relitigating issues which the defendant previously litigated and lost
against another plaintiff).
a. This is being asserted by a stranger to the 1st lawsuit
b. The problem with this is that the person asserting it was not
bound by the 1st suit
c. This method has additional limitations
i. Fairness
1. Were the stakes in the 1st suit comparable to the
stakes in the 2nd suit?
2. The offensive use of collateral estoppel may be
unfair to a defendant in cases where the
defendant was sued for nominal damages in the
first action and did not vigorously defend, denied
certain procedural advantages in the first action,
or where the judgment relied upon as a basis for

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the estoppel is inconsistent with one or more

previous judgments in the defendant's favor.
ii. Whether allowing the offensive Collateral Estoppel
would allow someone to take a “wait and see” attitude
1. If the court finds this to be the case, they will not
allow the party to use offensive Collateral
Estoppel
2. Plaintiff could easily have joined in the earlier
action or application of offensive estoppel
iii. Whether you have a risk of inconsistent judgments
_____________________________________________________________________________________

DISCOVERY
1. Provides parties with the opportunity to discover facts and evidence that support and / or detract
from claims and defenses asserted in the lawsuit
2. Discovery period usually lasts 3 months to 1 year (but can be extended)
3. Rule 16(b): Scheduling Order
a. Includes dates and deadlines for:
i. Litigation, including deadlines for amending pleadings
ii. Adding parties
iii. Completion of discovery, and
iv. Filing motions
b. Must be entered as soon as practicable, but no later than 90 days after appearance of
defendant and within 120 days of service of Complaint
4. Rule 26(b): Scope of Discovery
a. Parties can obtain discovery regarding any non-privileged matter that is relevant to the
claim or defense of any party
i. “Relevant” means having any tendency to make the existence of any fact that is
of consequence to the determination of the action more or less probable, see FRE
401.
ii. To be relevant, information need not be admissible at trial, but must be
reasonably calculated to lead to the discovery of admissible evidence
5. Privilege
a. Parties cannot discover information that is protected by a privilege
b. For policy reasons, protection applies even if information sought is relevant to the
litigation
c. Common Privileges:
i. Attorney – Client
ii. Physician – Patient
iii. 5th Amendment
iv. Accountant – Client
v. Clergy – Counseled
d. General Requirements for Privilege:
i. Communication must have been made with an expectation of confidentiality
ii. Confidentiality has not been waived by disclosure to persons outside of the
relationship
e. Privileges can be Waived:
i. Only by the holder of the privilege (or his agent)
ii. By disclosure to 3rd parties
6. Rule 26(b)(2)(C): Limitation
a. Use of discovery methods can be limited by the court if:

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i. Discovery sought is unreasonably cumulative or duplicative

ii. Discovery sought is obtainable from another source
iii. The burden or expense of the proposed discovery outweighs its benefits
7. Six Vehicles of Formal Discovery
a. Required Disclosures (FRCP 26(a))
i. 26(a)(1): Initial Disclosures
1. Requires automatic disclosure of:
a. Witnesses and documents (including electronically stored
information and tangible things) the party may “use to support its
claims or defenses,” unless solely to impeach
b. Damage computations
c. Any insurance policy that covers judgment
ii. 26(a)(2): Testifying Experts
1. Must produce identity of testifying expert and his report at least 90 days
before trial. Report must include:
a. Complete statement of expert’s opinion
b. Basis and reasons for opinion
c. Underlying data
d. Experts qualifications, compensation, and listing of cases in
which he has testified in past 4 years
2. You cannot depose a testifying expert until after the expert’s report has
been submitted
iii. 26(a)(3): Pretrial Disclosures
1. Within 30 days of trial or as ordered by court:
a. Must disclose information regarding witnesses who will testify at
trial and who may testify at trial
b. Must disclose deposition testimony that will be offered at trial
c. Must disclose exhibits that will be offered at trial and those that
may be offered
iv. Rule 26(f): Conference
1. Parties must meet as soon as practicable, but at least 21 days before
scheduling order
2. Parties must confer regarding:
a. Claims and defenses
b. Possibility and settlement
c. Make or arrange for initial disclosures (must disclose within 14
days of conference)
d. Issues regarding preservation of information
e. Develop proposed discovery plan
i. No formal discovery is permitted until after 26(f)
Conference has occurred
b. Written Interrogatories (FRCP 33)
i. Rule 33: Provides for service of written questions by one party on another party
1. Applies only to parties
2. Rule 33 limits a party to service of 25
3. Producing party must respond within 30 days
a. The answers must be signed by the party
b. A party can object to Interrogatories instead of answering
c. A party is not bound to what they say in an Interrogatory
i. This is different than a deposition

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c. Requests for Production of Documents and Things (FRCP 34)

i. Any party may serve a request for documents or inspections of property on any
other party to the litigation
1. No limit on the number of requests
a. Unlike deps and rogs
2. Producing party must respond within 30 days (must comply or object)
a. If the party doesn’t object, their legal right may be waived
3. The party asked to produce must produce the documents as they are kept
in the ordinary course of business
ii. Rule 45(a)
1. Provides for service of request on non-party. Requires subpoena
d. Mental and Physical Exams (FRCP 35)
i. On motion of party, a court can order another party to undergo a physical or
mental exam
1. Movant must show good cause
2. Physical or mental condition must be in controversy
3. Applies only to parties or those in control of parties
a. Schlagenhauf:
i. Movant must show that each condition as to which the
exam is sought is really and genuinely in controversy,
and that good cause exists for ordering each particular
exam
e. Depositions (FRCP 30)
i. The recorded examination of a live witness under oath by oral or written
questions before a qualified oath administrator
ii. These are intended to replicate the conditions at trial
iii. The person being deposed has the right to object to questions, but they must
object at that time otherwise their rights are waived
iv. Depositions can be performed on non-parties!!!
1. Rule 30: Deposition by Oral Questions
a. Most commonly used
i. Can take up to 10 deps, but number can be increased or
decreased by order of Court or stipulation of parties
ii. 7 hour time limit per dep (can be increased)
2. Rule 30(b)(6)
a. Seeking information from a corporate party
3. Rule 31: Deposition upon Written Questions
a. Written questions are served by lawyer desiring deps on all
parties
b. Court reporter administers all questions to deponent
c. These are included in the 10 dep limit
4. Rule 27: Pre-litigation Depositions
a. Permits discovery by deposition before litigation starts in order
to preserve testimony
b. Requires court order. Movant must show:
i. Matter is within SMJ of Federal Court
ii. Movant is unable for good cause to bring an action
iii. There is substantial danger that testimony will be lost
before complaint can be filed
f. Requests for Admissions (FRCP 36)
i. These usually come at the end of the discovery process

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ii. These only deal with specific facts from the case (not the law)
iii. These are binding (but only in that particular suit)
iv. These are only applicable to parties!!!
v. Person being asked to admit has 4 options:
1. Admit
2. Deny
3. Give reasons why can’t admit or deny
4. Object
a. If you fail to timely respond, that will constitute an admission
8. Common Objections
a. Overbroad
b. Vague and ambiguous
c. Overly burdensome and oppressive
d. Privileged information
e. Attorney work product
f. “Neither relevant nor reasonably calculated to lead to the discovery of admissible
evidence”
9. Spoliation
a. The destruction or material alteration of evidence OR the failure to preserve property for
another’s use as evidence
b. Duty to prevent spoliation begins the moment litigation is foreseeable
c. Even if a party doesn’t have control over the evidence, they still have an obligation to
give the opposing party notice of evidence
d. Courts have discretion in choosing sanctions for spoliation
e. In determining a sanction, a court must look at:
i. Level of culpable conduct
ii. Degree of prejudice to the other party
iii. Any other appropriate circumstances necessary to level the evidentiary field and
deter future like conduct
f. Enforcement Mechanisms
i. Rule 37
ii. Rule 26(g)
10. Work Product Doctrine
a. Rule 26(b)(3): Trial preparation and work product materials are protected from discovery
and need not be produced except when the information contained in such materials is not
reasonably available from any other source
i. Doctrine only applies to parties and their agents
ii. Only applies to written materials
iii. This is a qualified protection
1. Under the right circumstances, this information might be discoverable
iv. To avoid application of the doctrine, a party must show
1. That there is no reasonable alternative source for the same or
substantially equivalent information
AND
2. That the party has a substantial need for the information
v. Exceptions
1. Attorney’s mental impressions and legal evaluations
2. Party and witness statements are discoverable by the person making the
statement

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11. Expert Discovery

a. Testifying Experts
i. Subject to automatic disclosure provisions of 26(a)(2), and can be deposed before
trial
ii. Draft reports not discoverable
b. Non-Testifying Experts
i. Protected from discovery, UNLESS
1. Expert is a treating or examining health professional
2. Party can’t obtain facts or opinions on the same subject matter by any
other means
ii. This is a qualified protection
1. Under the right exceptional circumstances, this information might be
discoverable
c. Discovery of Experts
i. Expert is not protected from discovery if he acquired his facts and knowledge
through witnessing or participating in the events in question
1. In such case, the expert will be treated as a fact witness
a. A fact witness obtains information in the “ordinary course of
business”
12. Duty to Supplement (FRCP 26(e))
a. Parties must correct or complete required disclosures (and deposition of testifying expert)
if additional or corrective information becomes known
b. Without anyone asking you to supplement, you must do so whenever new information is
obtained
i. Exception
1. If the additional information is obtained when the other party is present
13. Protective Orders (FRCP 26(c))
a. Court has discretion, upon a showing of good cause, to enter an order to protect a person
from annoyance, embarrassment, oppression, or undue burden or expense
b. Good cause established by factual evidence, not conclusory statements
c. Request for concurrence is required
i. These are typically only filed on parties
14. Enforcing Compliance (FRCP 26(g))
a. Every disclosure, discover request, response and objection must be signed.
Signature Certifies:
i. Rule 26(a) disclosures are complete and correct
ii. Discovery request, response, objection:
1. Is consistent with Rules and existing law (or with a good faith argument
for modification or reversal)
2. Not been imposed for any improper purpose
3. Not unreasonable, unduly burdensome, or unduly expensive
iii. Rule 26(g) affects every piece of paper that you submit to the other party
iv. Sanctions for certification can be imposed on both the client or the attorney
v. You are basically asking the court to punish the other side for supplying false
information (this differs from Rule 37)
15. Enforcing Compliance (FRCP 37)
a. Motions to Compel
i. Party can file motion seeking to compel opposing party to respond to discovery
requests
ii. Must seek concurrence of opposing party in relief sought before filing motion

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iii. Victorious party entitled to expenses, UNLESS:

1. Movant filed to confer with opposing party prior to filing motion
2. Losing party shows conduct was substantially justified, or
3. Other circumstances render award of expenses unjust
iv. Per Rule 37(b), if a party fails to comply with a discovery order, a court can:
1. Deem facts established
2. Prohibit evidence
3. Strike pleadings
4. Issue a stay of action
5. Enter dispositive ruling
6. Hold party (or non-party) in contempt
7. Require payment of expenses
v. Under Rule 37(c), a party is subject to sanctions if he:
1. Fails to make required Rule 26(a) disclosures or makes false or
misleading disclosures
2. Fails to supplement a prior discovery request
3. Improperly fails to admit a matter in response to a request for admission
vi. New Rule 37(e): A “Safe Harbor”
1. A court cannot, absent exceptional circumstances, sanction a party for
“failing to provide electronically stored information lost as a result of the
routine, good faith operation of an electronic information system.”
a. This rule relates to E-Discovery
16. E-Discovery
a. Zubulake
i. Once a party reasonably anticipates litigation, it must suspend its routine
document retention/destruction policy and put in place a “litigation hold”
ii. Litigation hold doesn’t apply to inaccessible backup tapes unless the party can
identify where particular employee documents are stored on the tapes and tape
stores documents of “key players” that are not otherwise available
iii. Implementation of litigation hold doesn’t end attorney responsibility
17. Discovery Process
a. First, list the key facts and allegations
i. Then, ask yourself these questions;
1. What do you want to know?
2. Why do you want to know it?
3. What tool will you use to get it?
4. What objections will you draw?
5. Can you avoid them?
_____________________________________________________________________________________

1. Summary Judgment (Rule 56)—Provides for dismissal with prejudice of claim or defense that
is factually unsupportable prior to trial of case
a. Summary Judgment is Granted When:
i. After an adequate period for discovery
ii. The non-moving party is unable to show that a genuine issue exists as to any
material fact, and
iii. As a result, the moving party is entitled to judgment as a matter of law
b. Burdens of Proof
i. Burden of Persuasion
1. The ultimate burden of proving claim or defense by a preponderance of
the evidence

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a. The moving party has the burden of persuasion at all times

ii. Burden of Production
1. The burden of producing evidence to support the claim or defense, or
element of either
a. This burden shifts back and forth to both parties
i. Moving party must make out a prima facie case that
there is no genuine issue of material fact, then the
burden shifts to the non-moving party.
iii. The non-moving party can defeat the moving party’s motion for S.J. in 2 ways:
1. Show that the moving party didn’t meet the burden of persuasion
OR
2. Introduce affirmative evidence to show that an issue of material fact
exists
c. Affidavits
i. Consist of the sworn testimony of the affiant
ii. Requirements:
1. Must be made on personal knowledge
2. Must set forth facts that would be admissible at trial
3. Must establish affiant’s competence to testify
d. Other Summary Judgment Rules
i. Court must always view evidence in the light most favorable to the non-moving
party
ii. Summary judgment is not supposed to decide which set of facts is true
1. It determines whether there are 2 sets of facts
a. If there are, then no summary judgment

2. Jury Trials
a. 7th Amendment preserves right to jury trial in all civil matters where jury trial was
historically permitted (can be expanded by an act of Congress, but cannot be
diminished).
i. Does not apply to the states.
b. Jury trials are permitted for actions at law, not equitable actions
c. Rule of Thumb
i. Actions at law seek money damages (jury trial—substitutionary remedy) and
equitable actions ask the court to do or not to do something (judge trial—specific
relief)
1. Exceptions—replevin and ejectment each get jury trials.
d. Trial Process
i. Rule 38—must make timely jury demand, or right to jury trial is waived
ii. Impaneling of Jury
1. Voir Dire
a. Judge looks to see if any juror might be biased
2. Challenges for Cause
a. Challenging the ability of a juror to provide fair services
b. These are unlimited
3. Peremptory Challenges
a. Allow a lawyer to strike a juror without stating a reason
b. A judge can only excuse a juror for good cause
iii. Opening Statements
iv. Plaintiff’s Case

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v. Motion for Directed Verdict (Rule 50(a))

1. You have to file this even if you don’t think you should win because if
you don’t, you can’t later file a j.n.o.v.
2. Standard—Motion should be granted where the evidence is so one-sided
that no reasonable jury could find for the non-moving party
a. Court must view all evidence in light most favorable to non-
moving party.
b. Court must not make credibility determinations or weigh the
evidence
vi. Defendant’s Case
vii. Rebuttal
1. The plaintiff can’t expand the scope of the case here
viii. Motion for Directed Verdict AGAIN (Rule 50(a))
ix. Closing Arguments
x. Instructions to the Jury
1. Rule 51
a. Parties may submit to the court (and to other parties) proposed
jury instructions at close of the evidence or earlier as the court
directs
b. Court must provide parties with a copy of the instructions prior
to giving them, in order to give the parties the opportunity to
object
c. Objections must be timely or else they are waived
xi. Verdict
xii. Motion for Judgment as a Matter of Law (j.n.o.v.)(Rule 50(b))
1. Permits court to enter judgment that is inconsistent with the jury’s
verdict if the court determines that the verdict was not supported by the
evidence
2. Standard—Evidence is so one-sided that no reasonable jury could find
for the non-moving party
3. Motion for judgment as a matter of law (directed verdict) is a
prerequisite
4. 28 day limited after entry of judgment; can also be filed with a motion
for a new trial.
xiii. Motion for New Trial (Rule 59)
1. Serves 2 different functions
a. “Soft” form of Directed Verdict. Allows a judge who is pretty
sure the wrong side won to send the whole case through the
system again (highly discretionary)
b. Used when evidence presented to the jury has been compromised
due to judicial, jury or lawyer error or misconduct
2. Grounds for New Trial
a. Verdict against the weight of the evidence
b. Excessive or inadequate verdict
c. Newly discovered evidence
d. Improper conduct by counsel or the court
e. Improper conduct affecting the jury
3. May be ordered on motion or sua sponte
4. Time for Filing

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5. Courts employ different standards:

a. Directed verdict standard (strictest standard)
b. Miscarriage of justice standard (majority/middle standard)
i. Need to show why there was a miscarriage of justice
c. 13th juror standard (most deferential standard)
i. Judge acting as 13th juror to veto verdict
xiv. Appeal
1. Appellate Court Reviewing Trial Court’s Grant of a New Trial
a. Standard—abuse of discretion
3. The Jury
a. Size of the Jury
i. Rule 48—permits juries of not fewer than six nor more than 12 jurors – but
parties can stipulate to a verdict by less than six
b. Selection of Jury
i. 28 USC § 1861—juries are to be “selected at random from a fair cross section of
the community” in the district or division within which the court sits
ii. 28 USC § 1862—precludes exclusion from jury pool on basis or race, color,
religion, sex, national origin, or economic status.
iii. Rule 47
1. Voir dire conduct by court or parties
2. Three peremptory challenges (28 USC § 1870)
a. No reason need be stated
i. Batson—Can’t exercise race-based peremptory
challenge in criminal case
ii. Edmonson—extended Batson to civil context
iii. J.E.B.—another extension of Batson to gender
3. Unlimited challenges for cause
a. Court determines challenges for cause – goal is to weed out lack
of impartiality
c. Juror Qualifications (28 USC § 1865)
i. US citizen; 18 yrs old; reside in district for at least one year; minimum literacy
requirement and fluent in English; mentally and physically capable of service;
free of pending charge or conviction of felony.
4. Verdicts—Verdicts must be unanimous in federal court, unless parties agree to accept a non-
unanimous verdict.
a. Size of Verdict
i. Remittitur—Court can offer reduced award in lieu of new trial where the jury
award was excessive
ii. Additur—Court can offer increased award in lieu of new trial where the jury
award was inadequate
1. Not allowed in federal court

APPEALS
1. Appeal is available only from an adverse judgment – i.e., the judgment appealed from must have
caused actual harm to the litigant (30 days to file appeal)
2. Can’t appeal from judgments that are moot (where circumstances have changes in such a way that
relief is no longer possible).
3. Doctrine of Waiver—a litigant must raise the issue to be appealed from in the trial court, or the
right to appeal that issue will be waived.
a. Exceptions—Change in the law; plain-error rule

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4. 28 USC § 1291—appeals as of right can be taken from “final decisions” of the district courts
a. Final Decision—a judicial order that both conclusively resolves some important aspect
of a case and, under most circumstances, results in the termination of the litigation.
b. The “Final Judgment” Rule—litigants must wait until a final judgment in the trial court
before they can appeal decisions that they believe were erroneous and adversely affected
the outcome of the case.
5. Rule 54(b) – Allows for “piece-meal” final judgments
a. When there is more than one claim, trial court can direct final judgment as to one or
more, but fewer than all, the claims upon making an express determination that there is
no just reason for delay and upon an express direction for the entry of final judgment.
6. Exception to Final Judgment Rule
a. Collateral Order Doctrine—a decision is appealable under 28 USC § 1291 if it…
i. Is conclusive of the issue presented;
ii. Resolves important questions completely separate from the merits; and
iii. Is “effectively unreviewable” on appeal from final judgment because the party’s
rights cannot be “adequately vindicated” if the decision is not immediately
appealable.
7. Interlocutory Order—one that is not final, does not dispose of the litigation
a. Example—discovery orders, orders denying SJ, evidentiary rulings
b. 28 USC § 1292(a)—interlocutory orders concerning injunctions, receivership (court
appoints someone to run company), or admiralty are immediately appealable “as of
right.”
c. 28 USC § 1292(b)—a district court can certify an interlocutory order for appeal when it
determines that…
i. The order involves controlling questions of law as to which there is substantial
ground for difference of opinion; AND
ii. Immediate appeal from the order may materially advance the ultimate
termination of the litigation.
iii. Once certified, the appellate may or may not take the appeal, at its discretion. It
must then apply and be accepted for review by the court of appeals.
8. Mandamus—petition for writ of mandamus is filed with the appellate court and seeks an order
requiring the district court judge to do or refrain from doing something
a. Petition must allege that judge has either abused his discretion or refused to do his duty
b. Mandamus is to be invoked only in extraordinary circumstances
9. Standards of Review
a. De Novo Standard (questions of law)
i. Least deferential standard – trial court decision is accorded no deference.
ii. Appellate court applies its own independent judgment in determining the
meaning and content of the law.
b. Abuse of Discretion Standard (discretionary decisions by district court)
i. Applies to issues where exercise of trial court judgment is premised on precise
contours of pending case.
ii. District court will not be reversed unless it has made an error of law or clear error
of judgment
c. Clearly Erroneous Standard (findings of fact by the judge)
i. Finding is “clearly erroneous” when the reviewing court on the entire evidence is
left with the definite and firm conviction that a mistake has been made.
ii. Where there are two permissible views of the evidence, the fact-finder’s choice
between them cannot be clearly erroneous.

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d. Substantial Evidence Standard (findings of fact by the jury) Most deferential standard
i. Factual determinations must be upheld unless no rational juror could have so
determined
ii. Evidence must be viewed in a light most favorable to the jury’s findings.
e. Harmless Error Rule
i. Appellate court may not reverse unless error upon which reversal is based
materially contributed to the adverse part of the judgment from which the
appellant is appealing.
ii. 28 USC § 2111—federal courts are forbidden to reverse for errors or defects that
do not affect the substantial rights of the parties.

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CONSTITUTIONAL LAW I OUTLINE

Professor Daniel Ray, Michaelmas Term 2009

JURISDICTION OF THE SUPREME COURT:

1. Original (trial) Jurisdiction: Under Article III, Section 2, the Court has original jurisdiction “in
all (1) Cases affecting Ambassadors, other public Ministers and Consuls (public dignitaries) and
(2) those in which a State shall be a Party.”
a. Provision is self-executing: Congress may neither restrict nor enlarge the Court’s original
jurisdiction (see Marbury v. Madison).
b. Concurrent Jurisdiction: Congress may give concurrent original jurisdiction to lower
federal courts.
c. Controversies between two or more States: Presently, the Court’s original jurisdiction is
mainly occupied by controversies between two or more states.
2. Appellate Jurisdiction: Article III, Section 2, further provides that “in all other Cases before
mentioned, 1. Cases arising under the Constitution, an act of Congress, or a federal treaty, 2. In
which the US is a party, 3. Between a state and citizens of another state, and 4. Between citizens
of different states), the Court shall have appellate Jurisdiction, both as to Law and Fact, with such
Exceptions, and under such Regulations as the Congress shall make.”
a. Congress is authorized to make “exceptions and regulations” with appellate jurisdiction.
i. In theory, “no cases involving subject matter X shall be subjected to appellate
review of the Court”
b. Writ of Certiorari: Permission from either Fed CtApp, St SCt/CtApp
_____________________________________________________________________________________

POWER OF JUDICIAL REVIEW:

Marbury v. Madison: “It is emphatically the province and duty of the judicial department to say what the
law is.”

Although the Constitution does not expressly so provide, appellate jurisdiction includes the power to hear
appeals regarding the constitutionality of:
1. Acts of Branches of Federal Government (Legislative and Executive)
2. State Statutes
3. Judgments of State Courts: including…
a. Civil Cases (see Martin v. Hunter’s Lessee)
b. Criminal Cases (see Cohens v. Virginia)
4. Review Actions of State Officials (see Cooper v. Aaron)
_____________________________________________________________________________________

LIMITATIONS OF JUDICIAL REVIEW:

1. INTERPRETIVE MODALITIES:
a. Consequentialism: courts make rulings based on cost/harm-benefit analysis.
b. Institutional Competence: a particular institution has the authority, ability and expertise to
decide the matter. It is a comparative analysis. Works in favor of court hearing or not
hearing a case.
c. Textualism: look at particular word/phrase and apply common sense, generally accepted
usage of the term. (Look it up in a dictionary)
d. Expressio Unius est Exclusio Alterius: “Expressing some excludes all others”
e. Structural Argument: where the provision is placed in the Constitution, and based on the
location one can infer the meaning to that provision.
f. Formalism: see Executive Power Notes
g. Realizability:

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i. Substantively Realizable Rule: rule takes into account subjectively that facts and
circumstances of each individual case
1. Substantively Realizable Application For the Constitution: a formalized
rule would limit the enumerated powers as code, not ends. Allows for
implied powers as means.
2. Sacrifices Efficiency, difficult to understand and apply.
ii. Formally Realizable Rule: easy “bright-line” rule to understand and administer
1. Sacrifices Due Process, the fairness of the application of justice
2. Ex. Political Question Rule
2. CONGRESSIONAL REGULATION: Under the “exceptions and regulations” of Article III,
Congress may limit the Supreme Court’s appellate jurisdiction (see McCardle).
a. Limitations to Congressional Regulation:
i. Congress may eliminate certain avenues for the federal judicial review, but not
all—since this would destroy the Court’s essential role in the constitutional plan.
ii. Although Congress may eliminate the Court’s review of certain cases within the
federal judicial power, it must permit jurisdiction to remain in some lower
federal court.
iii. If Congress were to deny all Supreme Court review of an alleged violation of
constitutional rights—or go even further and deny a hearing before any federal
judge on such a claim—this would violate due process of law.
3. JUSTICIABILITY: Article III, “case or controversy” requirement must be satisfied. Certain cases
of which the court cannot, or should not hear.
a. Political Questions: if a case presents a “political question” rather than a justiciable
controversy, the Court will not decide the question (on the basis of separation of powers).
Final determination of such questions is left to the political branches  “Formal
Realizable Rule”  rule, easy to understand and administer.
i. Criteria Determination (see Baker v. Carr)
1. Textually, OR
a. A “textually demonstrable” constitutional commitment of the
issue to the political branches (see Nixon v. United States);
i. Interpretation of Constitution’s text to find such
commitment.
2. Prudential
a. Lack of any manageable standards for judicial resolution;
i. But, just because there are no manageable standards in a
particular case, does not mean that a standard might
emerge at a later date (see Vieth v. Jubelirer)
ii. Courts have created standards in Due Process cases.
b. Need for finality in the action of the political branches;
c. Respect the decisions of coordinate political branches;
d. Need to avoid embarrassment through differing announcements
(foreign affairs and diplomatic concerns);
e. Difficulty or impossibility of devising effective judicial remedies
ii. Examples of Political Questions:
1. Impeachment: Article I, Section 3, Clause 6: the “Senate shall have the
sole power to try all impeachments” (see Nixon v. United States)
b. Advisory Opinions: the Court will not render an advisory opinion to Congress or the
President on the constitutionality of some contemplated action or legislation because such
an opinion does not involve a “case or controversy.”
i. State Courts: may issue advisory opinions, depends on law of the state.

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c. Standing: The doctrine of standing concerns both the “case and controversy”
requirement of Article III and “prudential principles of judicial self-restraint.” The
second concern, which is a judicially self-imposed “policy limitation,” is “not always
clearly distinguished from the constitutional limitation.”
i. Constitutional Standing Requirements: minimum for Article III “Case or
Controversy”. These elements are REQUIRED
1. (Judicially Cognizable) Injury: has or will be (imminently) directly
and personally injured by the allegedly unlawful government action; the
injury need not be economic. The injury must be “distinct and
palpable,” (concrete/definite/discrete) not stigmatic
“abstract/conjectural/hypothetical.”
a. Economic Injuries: measured/quantified in terms of money.
b. Non-Economic Injuries: Mental suffering, etc. if they are proven
with sufficient specificity.
c. Constitutional Violations (Equal Protection Clause): Injury is the
failure to be accorded equal treatment under the law.
d. Congress Can Create Categorical Injuries by Statute: see Lujan
case on p.1568.
e. Violations to Common Law Rights: injuries to rights in tort,
contract, property (negligence can suffice for injury).
f. Chance or Opportunity: see Regents of the University of
California v. Bakke, injury caused from the deprivation, on
grounds of race, of the chance to compete for every place in the
entering class.
2. Causation: causal connection between the injury and the alleged conduct
complained of. The injury must be “fairly” traceable to the challenged
action. (Pragmatic, but-for)
3. Redressability: a decision in P’s favor must be capable of eliminating
the grievance. Relief must be “likely to follow” from favorable decision,
in whole or in part.
ii. Prudential Standing Elements: some degree of discretion
1. No Third-Party Standing: only the injured person is permitted to claim
a violation of constitutional (statutory) right. (General Rule)
a. EXCEPTIONS
i. Close Relationship W/Third Party Unlikely to Sue:
1. Where Litigant Must Have Suffered an ‘Injury
in Fact’: thus giving a “sufficiently concrete
interest” in the outcome of the issue in dispute is
analogous.
2. Close Relationship with Third Party: where
there exists some relation. Ex. Abortion doctor
sues restrictions, claim of injury is decrease in
income; doctor may also sue on behalf of
patients.
3. Third Party Unlikely to Sue: a claimant may
assert rights of third party where it is difficult or
impossible to vindicate his own rights.
ii. Associations: association, as well as one or more
members. NAACP v. Alabama (1957), case involving
the asking of the membership list. The association can

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demonstrate that the members would have had standing,

and issue is relevant to association’s purpose
iii. First Amendment: “Substantial Overbreath” doctrine, a
party whose own speech is not be constitutionally
protected may still have standing to sue to protect the
speech rights of another person whose speech is
constitutionally protected. Ex. Obscene speech, not
protected, is not same as pornographic, is protected as
long as it’s not obscene. Obscene person can challenge
porno regulation, to vindicate rights of porno speakers)
2. No Generalize Grievances (No Tax-Payer/Citizen Grievances):
taxpayers/citizens generally have no standing to attack allegedly
unconstitutional federal expenditures; the theory is that their interest in
such expenditures is too remote, indeterminate, and that any injury is
suffered in common with people generally.
a. EXCEPTIONS
i. Establishment Clause: may challenge Congressional
Appropriation for parochial schools under violation of
the religion clauses of 1st Amendment (see Flast v.
Cohen). (Federal Expenditure) Exception has effectively
been OVERRULED, yet still on the books  Courts
will distinguish in any way from Flast, and decline from
applying the exception.
1. Hien (2007), executive expenditure that may
violate 1st Amendment, no standing, NOT a
congressional appropriation.
ii. Inapplicable to Property Clause: gift of federal surplus
property to church college not under Congress’s power
of taxing and spending, but an exercise of power under
Article IV, Section 3, Clause 2: “Dispose of…property
belonging to the US.”
iii. Frothingham Exception: Municipal taxpayers have
Article III standing to challenge municipality of which
they are taxpayers (more direct injury/interest)
1. NOT extended to STATE taxpayers (see Asarco
Inc. v. Kadish)
3. Zone of Interests: any person who is aggrieved by any actions or
regulations of federal administrative agency shall have standing to sue
(see CAMP)  within the zone of interests contemplated beneficiaries
(Some courts have extended zone to federal statutory action).
iii. Standing of Voters: generally held to have standing when individual voters claim
deprivations of constitutional voting rights of various kinds (within districts =
standing, outside of districts = no standing) (see Baker v. Carr)
iv. Standing of Legislators: may have standing to challenge the constitutionality of
government action if they have a sufficient “personal stake” in the dispute and
suffer sufficient “concrete injury” (see Raines v. Byrd).
v. Standing to Sue in State Courts: standing to sue in state courts is governed by
state law, not Article III. If P wins in state court, and D appeals to federal court,
what happens? Per Asarco, the Court can hear the suit. D was unwillingly
dragged into state court. If P loses in state, no standing in federal court on
appeal.

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d. Mootness: a matter is moot if further legal proceedings with regard to it can have no
effect, or events have placed it beyond the reach of the law (examples: settlement, change
in the law that resolves the issue, death of a party).
i. EXCEPTIONS (the 4 C’s)
1. Voluntary Cessation: where D is acting wrongfully, but ceases to engage
in such conduct once litigation has been threatened or commenced (only
moot if action can NEVER occur again). No reasonable likelihood that
the offending conduct will be repeated of restarted  D bears burden
(see Grant for standard)
a. Example: Pollution
2. Capable of Repetition, Yet Evading Review: the person will frequently
be faced with a particular situation, but will likely cease to be in that
position when the court can provide a remedy for them in the time that it
takes for the justice system to address situation
a. Example: Pregnancy (see Roe v. Wade)
b. Capable of repetition is a factual decision
3. Class Action Representatives: a case will not become moot even if the
named plaintiff ceases to belong to the class that is seeking a remedy.
4. Collateral Injury: some injuries last after the wrong has ended
a. Example: a criminal conviction continues after release
e. Ripeness: a claim is not ripe for adjudication if it rests upon contingent future
events/injury that may not occur as anticipated, or indeed may not occur at all.
i. Criteria to seek pre-enforcement review of a (often criminal) law
1. Hardship to the parties of withholding court consideration, and
a. Article III Issue
i. More hardship = more likely to review
ii. Certain enforcement = sufficient hardship
iii. History of non-enforcement > statement of intent to
enforce
2. The fitness of the issues for judicial decision (Suitability)
a. Legal Issues—More likely to be Ripe (will hear)
i. Example: Is this a category of protected speech
(obscene)?
b. Factual Issues—More likely NOT to be Ripe (will not hear)
i. Example: Have the elements (like Actus Reus and Mens
Rea) been met.
f. Prerequisites Before Federal Court (Supreme Court) Will Review State Decisions
i. Final Decision: until decision in final, no federal review
1. General Rule: it disposes of ALL parties and ALL issues in the state
court
a. Exceptions (not addressed in this class)
ii. Issue of Federal Law: will not review state decisions that only involve issues of
state law. The final arbiter of state law in the state supreme court
1. Exceptions: Bush v. Gore?
iii. Federal Issue Must Have Been Preserved: the federal issue must have been
raised in the state court and preserved on the record. Cannot raise a federal law
issue for the first time on certiorari review.
iv. Court will not review state law decision that rests upon ADEQUATE and
INDEPENDENT State law grounds:
1. Adequate: state law adequate to resolve a suit if nothing that might
happen on federal court review will change the outcome (no matter what

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the Supreme Court does, the decision cannot change the outcome of the
case).
2. Independent: meaning of state law does not depend on some analogous
federal law.
a. Example: State construes due process to have more protection
than federal due process.
3. Presumption is State law is not adequate or independent (see Michigan v.
Long).
g. Federal Abstention: Two Circumstances Where Federal Courts Will Abstain from
Exercising Jurisdiction (DISCRETIONARY DOCTRINES)
i. Pullman Abstention: federal courts abstain from exercising jurisdiction where
resolution of a constitutional issue turns on an unsettled question of state law.
(Inverse of adequate and independent state law grounds)
1. In Pullman, the Court abstained because no Texas appellate court had
passed upon the legality of the regulation under Texas law. (Let state
courts have the first crack at this issue  court not sure if there are
adequate and independent state law grounds).
a. Particularly CRIMINAL LAW questions
ii. Younger Abstention: federal courts abstain from issuing declaratory injunctive
relief in regard to pending state court proceedings.
1. Federalism dictates that federal law accord due respect to the states and
their laws and proceedings. Violation of federalism principles if court
issued injunction. Raise the federal claims during state proceedings, and
appeal to the federal courts on certiorari.
2. Extraordinary Hardships (not just possible jail time) for federal courts to
intervene (one will lose federal protected right unless the federal court
intervenes right NOW).
_____________________________________________________________________________________

NATIONAL LEGISLATIVE POWER:

1. Enumerated Federal Powers: Article 1, Section 8, Clauses 1-17  laundry list of federal powers
expressly delegated to Congress (commerce, general welfare)
2. Doctrine of Implied Powers: in addition to those powers specifically enumerated in the
Constitution, the Necessary and Proper Clause imply certain broad federal powers.
a. Necessary and Proper Clause: Congress has the power “to make all laws which shall be
necessary and proper for carrying into execution the foregoing powers, and all other
powers vested by this Constitution in the Government of the United States, or in any
Department or Officer thereof” (Article 1, Section 8, Clause 18).
b. Congress May Use Any Appropriate Means: Congress may use any appropriate means
to achieve the legitimate (within the scope of the Constitution) ends
(purpose/outcome/object/interests of government) specified in the enumerated powers;
i. Any means plainly adopted to the end, not prohibited but consistent with the
letter and spirit of the Constitution (see McCulloch v. Maryland)
1. Precursor to Rational Basis Scrutiny: rational relationship between a
regulation and some legitimate government objective (see below for
STANDARD OF REVIEW under Commerce Clause notes 3(c)(vii)).
c. Application: applicable to ALL powers delegated to ANY branch of federal government.
d. “Necessary and Proper” NOT an independent source of legislative authority, only a
source of implied legislative power to accomplish some other enumerated power
3. Commerce Power: Article 1, Section 8, Clause 3, “to regulate commerce with foreign nations,
and among the several states, and with the Indian Tribes”

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a. ERA 1 (1789-1890) see Gibbons v. Ogden

i. Commerce—Intercourse between nations, and parts of nations.
1. Includes buying/selling/activities incident to commerce  navigation/
transportation. Broad definition of federal powers under commerce
clause.
2. What is NOT Commerce: Manufacturing (transformation of articles of
commerce), insurance policies.
ii. Among the States—commerce that involves more than one state (whenever a
commodity has begun to move as an article of trade from one State to another,
commerce in that commodity between the States has commenced.
1. Example: boat moving goods (to be used by other states) but never leaves
state is instrumentality of interstate commerce
iii. Scope of Power: plenary (complete in itself) authority, no specific limits other
than those in the constitution.
1. Ultimate Limitation: Political Process (of electing representatives). Only
remedy is through voting.
a. View on Limits of Federal Power: Two Opposing Schools of
Thought
i. Courts enforce identifiable limits, or
ii. Political Process is the appropriate method of recourse
b. (Lochner) ERA 2 (1890-1937) Lassiez-Faire Philosophy
i. Commerce—Only one stage of business; Zone of Interest for states that Congress
cannot interfere with
1. Production/Manufacturing of articles of commerce is a matter of local
regulation (see Hammer v. Dagenhart)
a. Agriculture, Mining, as well as Hours, Wages, Labor conditions.
ii. Among the States—Nothing solely within a state unless it adversely/directly
affects interstate commerce (see both Schechter Poultry, Shreveport)
iii. Tenth Amendment protects the States’ Zone of Interest
c. ERA 3 (1937-1990s) Economic Depression (FDR’s Court Packing Plan), “The Switch in
Time that Saved Nine.”
i. Commerce—All stages of business (no Zone of Interest for the States)
ii. Among the States—All (including local and intrastate in nature) activities that
have a close and substantially relation to interstate commerce that control is
essential/appropriate to protect the commerce.
1. Congress may regulate employment conditions (see Darby which
overruled Dagenhart), bar items that may be injurious to the public
health, morals, or welfare, even if state does not regulate.
iii. Tenth Amendment is in a “coma”
iv. Individual activity can be aggregated, and if the aggregate significantly affects
interstate commerce, then the activity can be regulated (the Aggregation Rule
developed in Wickward v. Filburn). Bottom-Up Approach.
1. Class of Activities Rule: (inverse of aggregation rule) regulating class of
activities within scope of commerce power, courts have no authority to
remove from that class the activities any particular person (see Perez v.
United States). Top-Down Approach.
v. No laws based on the Commerce Clause overturned
vi. Commerce Clause became the power source for civil rights legislation
vii. Standard of Review
1. Rational Basis Scrutiny: rational relationship between a regulation and
some legitimate government objective.

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2. A law is rational if it is not entirely “arbitrary and capricious”  if no

reasonable person look at what the legislature has done and could it was
not arbitrary and capricious.
a. “Law is valid, if any set of facts that are known or could be
reasonably assumed to support the law.”
b. Challenger bears the burden to prove law does not meet the
standard of rational basis scrutiny; he must negate the existence
of any facts that might support the law.
c. Regulation has strong presumption of constitutionality
d. ERA 4 (1990s-Present) IMPORTANT FOR EXAM PURPOSES
i. Congress May Regulate Under Commerce Clause Three Broad Categories
1. Regulate the use of the channels of interstate commerce (see Darby,
Heart of Atlanta) (“If it crosses a state line, the regulation is fine”)
regulation includes prohibition.
a. Highways (Roads), Airways, Waterways, Hotels, Restaurants,
Internet/Electronic (cables).
2. Regulate and protect the instrumentalities of interstate commerce, or
persons or things in interstate commerce, even though the threat may
come only from intrastate activities (see Shreveport).
a. Instrumentality: IN interstate commerce, and yet NEVER leave
the confines of one particular state (i.e. intrastate)
i. Example: automobile (thing in interstate commerce)
when driving across state line, along with the person,
and the items bought and in the car. See Daniel Ball
Case, the steamboat never left Michigan, but the goods it
distributed in Michigan were destined for interstate
travel at a later point.
1. Internet might also be an instrumentality
3. Regulate those activities having a substantial relation to interstate
commerce, i.e., those local activities that substantially affect interstate
commerce (even if the activity be local and not regarded as commerce)
(see Wickward and Jones & Laughlin).
a. Vast Majority of Commerce Clause action over the past 70
years.
What Substantially Affects Commerce?
b. Lopez/Morrison Test (2000) Higher Standard than Rational
Basis Scrutiny: OF THE 4 FACTORS, THE FIRST TWO TEND
TO DOMINATE THE ANALYSIS; they are crucial, but their
absence doesn’t void the law (but address ALL four for exam
purposes)
i. Does the law have anything to do with commercial or
any economic enterprise?
ii. Is there a jurisdictional element (nexus, hook) in statute
that ties the regulated activity (firearm possession) to
interstate commerce? [Met when Congress added “No
possession of firearm that has traveled in interstate
commerce.”]
iii. Has Congress made any findings to substantiate effects
upon interstate commerce? [Congress is not required to
have findings, but helpful to the Court]

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iv. Is there a link (relationship) between activity being

regulated and substantial effect on interstate commerce?
[Direct and proximate relationship, or indirect
remote/contingent relationship?]
4. The Court returned to Rational Basis Scrutiny in Gonzales v Raich
(2005).
4. The Taxing and Spending Power: Article 1, Section 8, Clause 1 grants Congress power “to lay
and collect taxes, duties, imposts and excises, to pay the debts and provide for the common
defense and general welfare of the United States.”
a. Lochner-Era Cases: attempted to limit taxing power by finding invalid regulatory motive
(Don’t Need to Know for Exam)
b. Congress Can Tax:
i. To raise revenue
ii. To achieve a valid regulatory Congressional goal
iii. If the tax does not violate other Constitutional provisions
iv. Congress can legislate regarding programs receiving federal funds
1. Example: Sabri v. United States (Federal law prohibits bribery of local,
state, or tribal officials who receive more than $10,000 in federal money)
a. Law is traditionally a state power
b. Is constitutional because Congress can oversee the use of federal
funds involved
c. Regulation would be unconstitutional if not linked to a specific
amount of federal funds.
c. Congress Can Spend:
i. Two Sources of Authority:
1. Necessary and Proper means to enumerated ends.
2. Article 1, Section 8 spending for the general welfare; an independent
power, not simply adjunct to other enumerated powers
a. Conditional Spending: (carrot-stick) federal money to the
states to build roads/education/etc., but if you want it, you have
to do “A,B,C and D” (conditions)
i. FOUR REQUIREMENTS (see South Dakota v. Dole):
ALL FOUR MUST BE MET
1. Spending must be for the general welfare
a. Is the expenditure for general public
purposes? Defer substantially to the
judgment of Congress [almost the
equivalent to political question, but
never said by the courts]
2. Condition must be clear and unambiguous, so
that if states choose to participate, they do so
knowingly and cognizant of the consequences of
their participation
a. Must state or show where to go for
controlling standards.
b. What is clear/unambiguous? Courts do
NOT say.
3. Conditions may be illegitimate if unrelated to
the federal interest in the particular national
projects or programs; i.e. reasonably related to
the federal interest (broad interpretation).

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a. Example: safe highways.

4. Other constitutional provisions may provide an
independent bar to the conditional grant of
federal funds; does this federal expenditure and
conditions violate other constitutional
provisions?
a. Dole involved 21st Amendment.
b. Federalism principles most at play with
this requirement (does it intrude too
much on state rights of the 10th
Amendment?)
i. In theory, States have a
“choice.” JUST SAY NO TO
THE DOUGH, and keep your
regulations.
5. Undue Coercion Element: after talking about
four elements, is the measure unduly coercive?
a. “Mild Encouragement” not unduly
coercive.
b. Substantively Realizable Rule?
5. Intergovernmental Immunities
In general, the Supremacy Clause places certain implied limitations on state power to regulate
and tax the property and activities of the federal government, and the 10th Amendment places such
limitations on federal power to regulate and tax the property and activities of state governments.
a. Federal Immunity from States Taxes
i. The Court has restricted such immunity to state taxes imposed “on the United
States itself, or an agency or instrumentality so closely connected to the
Government that the two cannot realistically be viewed as separate entities, at
least insofar as the activity being taxed is concerned.”
1. General Rule: States CANNOT directly tax or regulate the federal
government
a. Includes barring State taxes on the federal government’s direct
activities.
i. But States can impose income tax on federal employee
wages, why? INDIRECT regulation.
b. State Immunity from Federal Taxes (Federalism Doctrine Front and Center)
i. The general rule seemingly applies to federal taxation of the property and
activities of state and local governments—the Court will not find that an
otherwise permissible exercise of Congress’ taxing power violates the 10th
Amendment merely because it taxes states as well as private citizens.
c. State Immunity from Federal Regulation (Federalism in the Modern Era):
i. A general regulation that happens to affect the states as well as others (private
citizens) who engage in a certain activity, this affording broad representation in
the political process to those similarly affected, does not violate the 10th
Amendment. (See Garcia v. SAMTA overruling National League of Cities v.
Usery).
1. EXCEPTION: REGULATING STATES ALONE
a. Legislative/Executive/Judicial Branches: although historical and
constitutional structure permit Congress to require states judges
to enforce federal law, Congress may not commandeer the

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states’ legislative process nor require state executive officials to

enforce federal law (see Printz v. United States)
ii. WHO Decides Where to Draw the Line and HOW?
1. Courts—How? Categorical Approach/Limitations
a. In Usery: argued that federal regulation interfered with
traditional government functions of the states (formally looking
for whether or not it is a activity historically and traditionally
undertaken by state and local governments). Formally realizable,
bright-line rule
i. PROBLEM: what is a traditional government function?
Ex. Public swimming pools, utilities (which tend to be
privately operated), public transit.
1. Tradition is NOT a formally realizable rule.
2. Voters—How? Political Process (institutional competence argument)
(see Garcia overruling Usery). “Traditional” function was an
unworkable standard.
3. Back to the Courts POST-Garcia: Categorical Approach  has the
federal law commandeered the state legislative process/functions (see
New York v. United States).
a. Printz extends this rule to the commandeering of state executive
officials/functions.

APPROACH TO FEDERAL REGULATION OF STATE GOVERNMENTS

Does the federal regulation reach private conduct, as well as state conduct?
/ \
YES NO
/ \
Probably does not violate 10 Amendment Does the regulation compel or encourage?
(States are protected against such laws (state legislature or state official)
through broad representation in Congress) / \
Compels Ac Encourages Act
/ \
Regulation violates 10th Amendment |
|
The regulation does not violate the 10th
Amendment; Congress may encourage
states to comply with a federal plan by
conditioning grants, etc.
_____________________________________________________________________________________

EXECUTIVE POWER/SEPARATION OF POWERS: Article 2, Section 1: “The executive Power

shall be vested in a President of the Untied States of America.” (Vesting Clause)
1. Enumerated Powers: Article 2, Section 2  Commander in Chief, , Appointment Power, Article
2, Section 3 Take Care Power
2. Implied Powers: Any powers implied by those expressly enumerated powers, i.e., means to
effectuate the enumerated powers.
3. Does the President Also Possess “Inherent” Authority?: executive has power over national
security, are there any limits to the power over national security?
a. Example: War Powers Resolution: (1) President must report to Congress within 48 hours
of sending troops, and (2) unless the Congress declares war or affirms what the President

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has done, President must have troops sent back home in 60 days (90 days if necessary for
safety issues).
i. President’s Response: “I’m the Commander in Chief, and Congress cannot limit
that power.”
4. HOW DO WE LIMIT PRESIDENTIAL POWER?
a. Formalist Interpretation of Executive Power: Presidential power, if any, to issue the
order must stem from either the constitution itself or by act/statute passed by Congress
authorizing power to president.
i. In Youngstown, the constitution limits executive functions in the lawmaking
process to the recommending of laws he thinks wise and the vetoing of laws he
thinks are bad.
b. Functional Interpretation (Purely Domestic Matters): generally rule, the starting and
ending point of analysis when purely domestic matters are involved. If foreign affairs,
look beyond Youngstown.
i. Jackson’s Concurrence in Youngstown, President acting with or without approval
of Congress (CONTROLLING FOR PURPOSES OF EXAM)
1. The Youngstown Categorical Approach (Three Part Approach)
a. Did President acted with the express or implied approval of
Congress?
i. If yes, presidential power is at its maximum = strong
presumption of constitutionality.
ii. The only way it is unconstitutional, if we conclude that
what the president did was outside the realm of federal
power all together.
b. President acted in the face of Congressional silence, i.e. the
“zone of twilight.”
i. Constitutionality dependent on fact and circumstance
(had Congress acquiesced to the presidential action)
1. Look to: what kinds of laws or action has
Congress taken in the past when the President
has done this or something like this
c. President acts in a way that is contradictive to the express of
implied will of Congress (i.e. does opposite of what Congress
said he could do).
i. President’s authority is at its absolute minimum.
ii. Only way it is constitutional…
1. President had authority to do this on his own,
AND
2. Congress has NO authority over the matter
whatsoever (an area in which the president
acting alone has the authority to act)
c. Foreign Affairs: the President alone has the power to speak or listen as a representative
of the nation. He makes treaties with the advice and consent of the Senate.
i. Curtiss-Wright Approach: the power to make decision regarding international
affairs was vested in the President, especially in areas that could lead to
embarrassment of, or security issues for the nation. President is the “sole organ
of the nation in its external relations, and its sole representative with foreign
nations.”
1. Executive dealing with international relations is not necessarily
constrained by the constitution. Why? Powers inherent in a national
sovereign.

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a. Define and Defend Borders

b. Who is part of political community
c. Identify citizens
d. Recognizing foreign countries
2. IF ON EXAM, Does President have authority to do “x” and x deals with
international relations, diplomatic affairs, or war powers, look at BOTH
Youngstown AND Curtiss-Wright.
a. Youngstown Category 1  do not need CW analysis
b. If Y Category 3  talk about CW and whether CW tips scales
enough to make actions constitutional
i. But CW most likely will NOT make action
constitutional.
c. IF Y CATEGORY 2  CW TIPS ACTION IN FAVOR OF
PRESIDENT IN ANALYSIS
i. I.e., the weight of CW turns on Youngstown Category.
ii. Limitations (?): Congress has the power to regulate commerce with foreign
nations.
5. War on Terror Cases: question, does the President have the authority to do XYZ?
a. Hamdi Case: American citizen, detained at Guantanamo Bay. [Can the President hold an
American citizen in violation of habeas corpus?]
i. Detention? President has power to detain American citizens [identified as
unlawful, enemy combatants?].
1. Status: (1) President declares X as a enemy combatant, or (2) a terrorist,
or (3) providing material aid to terrorist groups.
ii. How long? Cannot be held indefinitely, can detain for duration of the hostilities
(theoretically, power to hold forever as long as there is a “war on terror”)
iii. Due Process Rights? Same basic constitutional, fundamental process due to any
other citizen (not applicable to non-citizens)
1. Matthews v. Eldridge Balancing Test (for due process rights):
a. Notice for basis of detention
b. Opportunity to be heard
c. By a fair and impartial decision maker
i. “Combatant Status Review Tribunal” (military officers
that report to the Executive)
iv. Habeas Corpus: all detainees allowed Habeas review, but still an issue for
Article III courts.
6. The Administrative State: federal government prior to FDR not capable to responding to
economic crisis and issues  Congress + FDR = created a variety of administrative, executive
agencies to respond to particular kinds of economic problems and issues.
a. Congress enables agencies power to regulate particular activities.
i. Example: FDA makes rules and regulations for food and drug safety.
Regulations have the force of federal law (subordinate to statutes), along with the
enforcement of those regulations with sanctions.
b. Same agencies have capability of quasi-judicial activities
7. Legislative Delegation of Power to Executive: Constitutionality of Delegation?
a. Rulemaking Power:
i. Non-Delegation Doctrine: Pre-1936, see Schechter Poultry, Congress
improperly delegated legislative power to the executive branch. [Technically a
lie, has not been invoked in 6 decades]

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ii. Whitman v. American Trucking Test: if Congress has stated an “intelligible

principle” standard to guide agencies rulemaking authority = constitutional
(Example “in the public interest”)
1. If Congress states anything that might be said to intelligibly guide
agency = OK.
iii. Validity of Agency Regulations (Chevron Doctrine):
1. If Congress has expressly directed an agency to create a particular
regulation, any regulations the agency create = constitutional, so long as
they are not arbitrary and capricious.
2. Implied Regulatory Authority, regulations are valid if they are
reasonable.
iv. Congress (which creates the agency)  Rulemaking Delegation (Intelligible
Principle Standard)  Agency  Validity of Regulations (Chevron Doctrine) 
Regulation
b. Legislative Vetoes: House of Representatives only has unilateral act of initiation of
impeachment; Senate unilateral power to try impeachment, approve Presidential
appointment, and to ratify treaties.
i. Chadha Case: one house to unilaterally veto = unconstitutionally making of law.
Stands for the proposition, that the legislative veto is unconstitutional (cannot
reserve the power for itself the power to unilaterally make or change the law)
1. Formalist: In order to make law/policy, follow requirements of Article 1,
Section 7: bicameral passage and presentment to President.
2. Functionalist (Dissent): Congress is not making law, just following the
law (the underlying law was passed bicamerally and presented)
ii. However, legislative vetoes are all over the place. They are often used as a
check on the executive branch.
1. Congress in a bad situation if unable to preserve the legislative veto.
c. Line-Item (Presidential) “Vetoes”: rationale similar to unconstitutionality legislative veto.
Under Clinton v. New York, Congress authorized President to line item “veto” (after
signing the bill into law, President strikes out certain provisions). Unconstitutional, in
violation with Article 1, §7.
i. Formalist: changing the law = unconstitutional
ii. Functionalist: President is just exercising the power Congress gave him; he is
following the law.
iii. Distinguish from “Signing Statements”: constructive line item veto
8. Appointment (and Removal) Power: Article II, Section 2, Clause 2: President nominates, and
with advice and consent of Senate appoints, ambassadors, justices of the Supreme Court, and all
other officers whose appointments are not provided for in the Constitution.
a. HOWEVER, Congress has discretion to vest power of appointment of inferior officers
(not primary officers) to Executive, Administrative Heads, Judicial (Legislative left out)
i. Officer (Primary/Principal): appointment authority rests with the President (any
appointee exercising significant authority pursuant to the laws of the United
States) (see Buckley v. Valeo).
1. Rule of Thumb: If employed by executive branch, employed as an
officer.
ii. Inferior Officer: Congressional discretion to vested in President, Heads of
Department, or Judicial.
1. Functionalist (Rehnquist’s Approach): (1) limited jurisdiction, (2)
limited term of office (tenure), and (3) lacking policymaking or
significant administrative authority (see Morrison)

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2. Formalistic (Scalia’s Bright-Line Rule Approach): inferior officer means

any relationship with some higher-ranking officer below the President
(see Edmond). Heads of Cabinet = Principal.
b. Removal Power: Inherent Power of the Executive, President’s executive power includes
the power to remove executive officers of the US (see Myers): “President has the power
to appoint, President has power to remove.”
i. What About Federal Administrative Agencies (under executive control)?
Congress creates agency and has the removal power for officers exercising quasi-
legislative, quasi-judicial functions (policy  protect these individuals
discharging duties, independent from the executive control). No undue
encroachment on executive branch.
ii. Humphrey’s Executor Limitations on Removal Power: for quasi-judicial, quasi-
legislative functions
1. Congress Can Make Office for Term of Years
2. Congress Creates For-Cause Removal Provision: (just/good cause)
cannot remove unless the President can show cause for their removal
iii. Morrison Congressional Limitations on Removal:
1. Formal: Scalia’s Dissent, federal prosecutor exercising purely executive
function, within supervision and control of the President, allows for free
will termination.
2. Functional: are the officer’s functions central to the functioning of the
Executive Branch? (see PAGE 160 FUNCTIONAL
CHARACTERISTICS FOR NOTES IN SOME OTHER PLACE)
9. Executive Privilege and Immunity: STRUCTURAL CONCEPTS, in the text of Constitution,
no where will you find in the text about executive privilege
a. Privilege: keep communications secret, but to what extent will presidential
communications be kept secret?
i. Presidential Privilege: is not absolute, but may extend to matters involving public
interest matters like protecting military, diplomatic, or sensitive national security
secrets. Derived from the functions of the Executive Branch (see United States v.
Nixon).
1. Three Types of Privilege
a. War powers, National Security???
b. Informant’s Privilege
c. Generalized Interest in Confidentiality of Communications
2. Balancing Test FOR EXAM PURPOSES: balance the interest the
executive asserts compared to some other interest (Example: Article III
courts exercising their judicial function).
3. Privilege Extends to Former Presidents
4. Congress can Limit the Privilege
5. Scope of Privilege
a. Within context of criminal matter, not civil matters
b. Not involved with testimony in front of Congress
6. States Secret Privilege: similar but distinguish from executive privilege
(NOT ON EXAM)
ii. Legislative Privilege: Article 1, §6, cl.1: privileged from arrest
b. Immunity: the party that is immune cannot be held liable (from civil liability, and open
question for the President concerning criminal liability). But there could still political
consequences attaching to actions (i.e. impeachment).

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i. Presidential Immunity: General rule, the President is entitled to absolute

immunity from “ civil damages liability predicated on his official acts” or duties
within the scope of the office (see Nixon v. Fitzgerald).
1. Extended only to the President, and only for civil damages liability, but
has not been extended to equity relief, liability to be impeached, or
criminal liability.
2. The Norm  Qualified Immunity: “functional” analysis/function-
oriented inquiry (applies to everyone other than the President in the
executive branch)
a. If engaged in (1) legislative, (2) judicial, or (3) prosecutorial
functions = generally, immunity is absolute from civil damages
liability.
i. Example: Prosecutor suborns perjury, P immune from
civil damage liability (not criminal liability or ethical
liability)
b. If engages in other acts: immunity depends on whether your
actions violated “clearly established” rights of which a
reasonable person would have known.
i. Example: “Bong Hits for Jesus Case,” violation of
school drug policy, suspends student. Principal claims
immunity from lawsuit involving violation of student’s
1st Amendment Freedom of Speech. The 9th Circuit said
that she was not immune b/c her action clearly violated
freedom of speech for which a reasonable person would
have known.
c. Vice President: the court will probably apply the same immunity
of the President to the Vice President.
_____________________________________________________________________________________

STATE POWER TO REGULATE

FEDERAL PREEMPTION OF STATE LAW: A fundamental principle of federal law –the Constitution,
federal statutes, and federal treaties—Congress has the power to preempt state law, Art. VI, cl. 2, see also
Gibbons v. Ogden. State law my be preempted by federal law under the Supremacy Clause. [Only a
concern where there is some POSITIVE federal law (federal judicial decisions, executive orders)]
1. Key issue is federal intent; not always clearly expressed
a. FOR EXAM PURPOSES WRITE (for any preemption question): “This question raises
the subject of federal preemption of state law. The question is determined by reference to
federal intent…”
2. Basic Preemption Framework: Preemption may be expressed or implied…
a. Express Preemption: Congress expressly declares intent to preempt state law
i. May be found if you find within the federal law some language, typically called a
preemption clause, declaring expressly the federal intent to preempt state laws
(preempt, supercede, override, displace, etc.).
1. Example: Employee Retirement Income Security Act of 1974 (ERISA),
preemption provision says that it “supercede[s] any and all State laws
insofar as they may now or hereafter relate to any employee benefit
plan.”
a. What Laws are Preempted? State statutes, regulations, and
common law claims are preempted.
b. What Laws a ”Relate To” Benefit Plan? State community
property laws mandating division of plan accounts, state

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common law tort and contract claims, state statutes relating to

employee benefit plans
b. Implied Preemption: Congress has not expressly declared intent to preempt, but intent
may be implied by the circumstances
i. Field Preemption: federal law so completely occupies a field that there is no
room for state regulation. Federal law is exclusive.
1. States cannot regulate what is contrary to federal law, states also cannot
regulate consistent with federal law.
2. Four Factors for Deciding Field Preemption (first two are most
controlling)
a. History and Traditional: Can the courts point to historical
treatment of exclusive or near-exclusive control
i. Examples: Foreign Affairs, military affairs, immigration
and naturalization, aviation, broadcast licensing
b. State Regulation Interferes with Federal Laws/ Regulatory
Efforts
i. Would multiple, conflicting state regulations interfere
with comprehensive uniform federal regulatory scheme?
c. Has Congress Declared Intent (statutory or legislative
history) That Federal Law is to Exclusively Occupy an Area?
d. Is There an Important State Interest that Might Override the
Federal Interest?
i. Hillsborough, importance of state interest in regulating
health and safety of blood supply one factor in finding
no field preemption.
ii. Conflict Preemption: state laws conflicts with federal law, so state law is
preempted
1. Impossibility: requirements of federal and state law make compliance
with both impossible
a. Example: McDermott v. Wisconsin, federal law required product
labeling that state law prohibited.
2. Frustration of Federal Purpose: allowing state law to stand would
frustrate a federal policy or program
a. Example: Nash v. Florida Industrial Comm’n, state law denied
unemployment benefits to employees who filed unfair labor
practices charges with NLRB.
i. Court said that reporting unfair labor practices was a
major purpose of National Labor Relations Act.
1. State law punishing such reporting frustrated
Congress’ purpose and was preempted.
b. WHAT IS THE PURPOSE OF THE FEDERAL LAW?
i. Pacific Gas & Electric v. State Energy Resources
Conservation of Development Comm’n (1983).
1. State imposed temp ban on construction of new
nuclear power plants, and not preempted by
federal law, why?
2. Federal Purpose = safety
3. State Purpose = economic

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DORMANT COMMERCE CLAUSE DOCTRINE (also known as the Negative Commerce Clause):
Key issue is state discrimination against interstate commerce. EXAM PURPOSES: Answer starts
with: This question raises an issue under the dormant commerce clause doctrine (judicial creation,
stemming from the commerce power). Under DCCD, the dominant inquiry is state discrimination against
interstate commerce.
1. Historically: distinguish categorical approaches [do NOT need to know for exam purposes]
a. Commerce v. Police Power (not formally realizable)
b. Local v. National Concern (need for nationally uniform rule belongs to Congress)
c. Direct v. Indirect Regulation of Commerce (Congress cannot regulate indirect)
2. Present Functional Analysis: Does the State discriminate against interstate commerce?
a. YES, State regulations (1) facially or (2) purposely (motivations) or effectually
discriminate. Burden on Challenger to show discrimination, if there is discrimination, the
burden shifts to the State to show validity. Regulations that purposely or facially
discriminate are virtually per se illegal.
i. Strict Scrutiny: State burden to overcome presumption of invalidity:
1. Does State law serve a legitimate (compelling?) government interest?
a. What Is Legitimate? Saving lives, protecting children from
obscenity, etc. (more specific claims than just health, safety, and
welfare concerns)
i. Economic Protectionism is never a legitimate interest
2. Can that interest be accomplished by a less discriminatory alternative
that adequately protects the state’s interest?
a. This is practically where the analysis fails for the State.
ii. ASIDE: Reciprocal Laws are facially discriminatory; however…
1. Direct subsidization of domestic industry is allowable
a. Unless net-effect is a tariff on out-of-staters.
2. Tax-credit is not allowable.
a. Economically have the same effect of subsidy
b. NO, State regulation only incidentally restricts interstate commerce (Example: like the
regulation of containers in which an item of commerce can be marketed, regardless of
where it is produced)
i. Pike Balancing Test: do the state benefits outweigh the burdens on interstate
commerce?
1. Burden does NOT shift to State; it stays with the Challenger.
a. Is the restriction motivated by a legitimate government interest?
i. Economic Protectionism is never a legitimate
government interest
ii. Challenger must negate any legitimate state interest
b. If the burden on interstate commerce is clearly excessive in
relation to the local benefit of the law…
i. Burden still Challenger to show that it is excessive.
2. WILL MOST LIKELY SURVIVE SCRUTINY
a. Somewhat nebulous test; Scalia, J., “it’s like judging whether a
line is longer than a rock is heavy.”
3. EXCEPTIONS to Dormant Commerce Clause Doctrine
a. Congressional Authorization: if Congress gives States permission to discriminate
against interstate commerce, then States can discriminate against interstate commerce
(see Prudential)
i. May have to figure out whether Congress has the authority to make that federal
law under the Commerce Clause, i.e. go through the standard commerce clause
analysis…

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1. Channels, Instrumentalities, Local Activities Substantially Affects

2. Do NOT assume validity of the federal law
a. If the federal law is invalid, then it acts as though there is no
authorization.
b. Market Participation Doctrine: states not regulating but participating in the market,
then the state is allowed to favor its own citizens, i.e. enters market to buy/sell goods as
any other private participate (see Reeves).
i. Commerce Clause is concerned with State Taxes and States Regulations that
affects/impedes free private trade.
ii. Basic Rule: States are free to enter market to buy/sell goods/services (including
the state as an employer), free to discriminate in favor of in-staters within the
market in which it is a participant.
iii. LIMITATIONS:
1. States MAY NOT impose conditions, whether by statute, regulation, or
contract, that have a substantial regulatory effect outside of the
particular market (see South-Central Timber Development).
c. Traditional Government Activities/Functions Doctrine: emerged within the last
couple terms of the US Supreme Court. Government engages in a governmental activity
(providing goods and services for the operation of government), State should be free to
discriminate against interstate commerce.
i. Powell, J. Dissent in Reeves
ii. Souter, J. Dissent in Carbone, collecting and disposing of waste is a traditional
government function.
iii. Oneida-Herkmier Case, makes traditional government activity the law
(disposing of waste, citizens expect their local governments to do this activity).
No discrimination against interstate commerce, then apply the Pike Balancing
Test (4-Vote Plurality).
1. RULE: when state or local government undertakes a traditional
government activity/function, and when government regulates to favor
that activity, as long as all other are treated the same (public, private, in-
state, out-of-state entities), there is NO discrimination on interstate
commerce
a. FOR EXAM: just mention Pike analysis in addition to
traditional government activity/function analysis.
iv. Follow-Up, Kentucky v. Davis, Souter removes Pike from analysis.
FOR EXAM PURPOSES: Address all exceptions when confronted with DCCD
questions.

PRIVILEGES AND IMMUNITIES OF STATE CITIZENSHIP: Art. IV, §2, ch.1: no state can deprive
any citizen of another state of the privileges and immunities of citizenship in that state (i.e. it bars
Michigan from discriminating against persons from another state, solely because they are a citizen of
another state, and depriving them privileges and immunities attached to Michigan State citizenship;
generally, Michigan must extend those to citizens of all other states)
1. One state may not discriminate against citizens of another state in regard to…
a. Exercise of fundamental rights
b. Certain economic activities, such as employment or pursuing a trade of business
2. Applies to citizens; narrower than persons
3. Two-Part Test
a. Does state or local law impact a protected privilege or immunity of state citizenship?

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i. States discriminating against out-of-staters in regard to fundamental

constitutional rights and other important rights (court has never enumerated
rights under Article 4)
1. Examples: Doe v. Bolton, restricting access to medical care; the right to
travel interstate.
ii. States discriminating against out-of-staters in regard to right to work or earn a
livelihood, pursuing a trade of business (vast majority of cases involving this first
part of test)
b. (If it involves protected privileges and immunities) Can the State justify the
discrimination against non-citizens? [Intermediate Scrutiny]
i. State most articulate a substantial government interest for the difference in
treatment, and
ii. The discrimination practiced against nonresidents bears a substantial
relationship to the State’s objective (more than rational, less than least
discriminatory).
4. Additional Notes: applies to political subdivisions of states, (2) no matter that state also
discriminates against in-staters, (3) limited to natural person who are citizens (corporate entities
are artificial), (4) residency is interchangeable w/citizenship for purposes of determining state
citizenship, (5) wider reach than DCCD b/c no similar exceptions.

STATE TAXING POWER: same general considerations applicable to state regulation of commerce apply
to taxation. Pursuant to the commerce clause, Congress has complete power to authorize or forbid state
taxation affecting interstate commerce. If Congress has not acted, look to see whether the tax
discriminates against interstate commerce. If it does, it’s invalid. If it doesn’t, assess whether the burden
on interstate commerce outweighs the benefit to the state.
a. Four-Part Complete Auto Test:
a. The tax is applied to an activity with a substantial nexus between the activity and the the
taxing state
i. “B has a factory in the state, or an office or B has employees in the state or a
server” this tends not to be a huge problem
1. Exceptions—no substantial nexus found if the taxpayer does not have a
regular and continuous physical presence in the state.
b. The tax must be fairly apportioned
i. Want to avoid multiple taxes and make sure whatever slice of tax pie is attributed
to MI doesn’t also get attributed to some other state. This usually involves an
apportionment formula
1. Apportionment Formula (Combination of 3 Factors) compare with
nation-wide factors.
a. In-state income or sales (10%)
b. In-state property (8%)
c. In-state payroll (12%)
c. The tax does not discriminate against out-of-staters.
i. Look to inquiries like in standard DCCD Model
1. Does the tax law facially discriminate? Discrimination e.g, out-of-staters
have to pay more than in-staters, law struck down
2. Facially Neutral—but tax’s purpose or effect is discriminatory, law
struck down.
3. Be on the look out for taxing in-staters and out-staters at different rate
(out-of-staters at a greater tax base, discriminatory)
d. And the tax is reasonably related to the services provided by the state and the tax [value
in exchange for the tax]

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i. Tax needs fair relation to the services the state provides to the taxpayer (this is a
throw away), court’s ought to just get rid of it, e.g., the business uses the state’s
roads and the taxpayers pay for the roads so the tax is fairly related to the
services provided by the state
1. Access to services (police/roads), value received for taxes

STATE ACTION: the language of the 13th, 14th, and 15th Amendments restricts only governmental
action. “State action” includes more than action taken by the legislative, executive, judicial, and
administrative branches of the federal and state governments and their subdivisions; it also includes
certain actions taken by ostensibly private individuals or organizations. [§1 of 14th “No State shall…]
“When is it fair to say that some private actor has done something that makes him effectively an actor on
behalf of the state?”
1. Easy Cases—prosecutors, mayors, legislative action…
2. Acts of Government Agents—state action includes conduct of government officials acting in
their official capacity (“under the color of law”) even though law may forbid the specific action
they take.
3. “Public/Government” Functions—activities undertaken by private individuals or organization
that are ones “traditionally the exclusive prerogative of the State.” [Court recognizes ONLY 3]
a. Elections: conducting elections is traditionally an exclusive state function, and racial
discrimination by groups with effective control over the selection of candidates is
invalidated.
i. Primaries—a political party cannot exclude individuals based on race from
voting in primary elections from which the party nominee for the general election
is chosen (see Allenwright)
ii. Pre-Primaries—county political groups cannot exclude individual based on race
from a preprimary election when the winner almost always runs unopposed in the
party primary and general election (see Terry)
b. Running Towns (Functional Equivalent): company towns that have “all the
characteristics of any other American town,” and while the town’s streets are privately
owned, they are the functional equivalent of public streets (see Marsh).
c. Public Parks: operation of a park is usually deemed a governmental function, so
generally the operation of a park will constitute “state action” under the “public function”
doctrine. Therefore, even if the park is being operated by private persons, it must still
obey constitutional constraints (i.e., it can’t be operated for white only, see Evans v.
Newton)
4. State Involvement and Encouragement (Entanglement)—government is not constitutionally
required to outlaw private discrimination (merely permitting private conduct to occur is not
enough for “state action”). The state must compel or significantly participate in the private
conduct (some sort of affirmative act by the state approving the private action; it is not enough
that the state permits the conduct to occur).
a. Judicial Enforcement of Private Discrimination: if state courts enforce racial
discrimination of private individuals (like, racial restrictive covenants) then there is “state
action” (see Shelley).
i. What if the court refuses to act? (Court disposes of the case) Arguably yes; one
side wins, one side loses.
b. Government/State Policy Approval of Private Conduct: the purpose of state
constitutional amendments that repeal racial antidiscrimination laws is seen as
encouraging racial discrimination; b/c discriminators were freed from any official
censure as a matter of basic state policy (see Reitman, failure to prohibit housing
discrimination, the state “encourages” housing discrimination)

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c. Official Acts: State action may be found in the absence of an unconstitutional statute or
ordinance if it appears that the state sanctions constitutional violations by its own officers
i. Discriminatory Law Enforcement—Example: sit-in demonstrators, police invoke
trespass and breach of peace laws to enforce local custom of racial segregation in
the absence of statute or ordinance (see Lombard v. Louisiana)
ii. Apparent Legal Authority—even if a state forbids officers from acting in a
certain way, the forbidden action may still constitute state action if the state puts
the actor in a position to commit the unconstitutional act
iii. Public Defenders—PDs do not act for the state when representing indigent client.
Therefore, negligence or malpractice is not a denial of due process (see Polk
County v. Dodson)
d. “Symbiotic” Relationship: a relationship b/t state and private actor that is mutually
beneficial/jointly involved in some enterprise and there is also a financial relationship b/t
the two. State action found where private discriminator was a lessee of public property
(restaurant operated as an “integral part” of public parking structure, see Burton)
i. However, where private discriminator on private property with private
membership access, allowed to discriminate (see below, Mooselodge).
e. Administration of Private Trust by Public Officials: state action exists where city
personnel maintain a park that discriminates under a private trust (see Evans)
f. Entwinement of State and Private Entities: state action may arise from the fact that the
state is so "entangled" or "entwined" with a private actor that even though the state might
not directly benefit from the private actor's conduct, the conduct will still be treated as
state action. This is true where the state and the private party act together to carry out the
action being challenged.
i. Example—NCAA is a voluntary association of public and private universities
that establishes rules for its members regarding collegiate sports. NCAA urged
member college to suspend coach for recruiting violations; coach cannot
successfully sue the NCAA for violating his constitutional rights b/c no state
action (see NCAA v. Tarkanian).
5. Limits of Doctrine (No State Action)—
a. Shopping Centers—while similar to the business district of an ordinary town, it is not the
functional equivalent of a municipality b/c it does not possess all of the attributes of a
town
b. Heavy Regulated Businesses/Monopoly Businesses—a heavily regulated company that
had been granted a monopoly by the state was held not to have engaged in state action
i. Example: Jackson, the supplying of utility service is not traditionally the
exclusive province of the state.
ii. Nursing Home—operated by private corporation did not exercise state action
when it discharged Medicaid patients, even though its operations were
extensively regulated by the government (see Blum)
iii. Running a School—operated by private corporation did not exercise state action
when it discharged teacher even though the school had contracts with the state to
educate or care for many of its students and received almost all of funding from
the government (see Rendell-Baker)
c. Licensing and Provision of Essential Services—granting a liquor license and providing
essential services (police, fire, water, power, etc.) to a private club that imposes
restriction on its members and guest are not sufficient to constitute state action
(Mooselodge). Licensing—similarly, the fact that the state has licensed a private person
is generally not enough to convert the private person’s conduct into state action.
d. Congressional Grant of Corporate Charter and Exclusive Name—is not sufficient to
constitute state action (see San Fran Arts & Athletics, Inc.)

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e. No Gov’t Duty to Protect Individuals from Harm by Private Persons—the mere refusal of
gov’t agents to protect V from harm by a private person will not result in a finding that
the harm was attributable to state action, at least when state law does not give V a right to
gov’t protection (see DeShany, gov’t not responsible for harm on child by father, even
though gov’t social worker had reason to believe the child was being abused and did
nothing).
_____________________________________________________________________________________

PROCEDURAL DUE PROCESS: (5th and) 14th Amendments: “No…State [shall] deprive any person of
life, liberty, or property, without due process of law.”
1. Liberty—the right to be free of physical restraints imposed by government in both the
noncriminal and criminal context. Includes the right to contract and to engage in gainful
employment (see Board of Regents v. Roth, refusing to rehire Roth did not violate due process).
a. Defamation by Government—includes the right to be free from defamation by a
government official, when such defamation is made public and occurs in connection with
denial of some significant tangible interest.
i. Defamation resulting only in damage to one’s reputation is NOT a denial of
“protected” liberty (see Paul v. Davis)
ii. Defamation resulting in mere loss of public employment w/o publicity is NOT a
denial of “liberty” (see Bishop v. Wood).
2. Property—more than ownership of realty, chattels, or money. It also includes “entitlements”—
i.e. “interests already acquired in specific benefits.” There must be a legitimate claim to the
benefit under applicable local, state, or federal law/statute (unilateral expectation will not suffice)
a. What entitlements? Contract/Rule/Regulation/Policy/Longstanding government practice
can create an entitlement
i. Examples
1. Public Education (when school attendance is required)
2. Continued Welfare (government) Benefits (if applicant meets statutory
criteria)
ii. Non-Examples
1. To defeat entitlement, put it in writing/the contract/policy (“at-will”
employment)
2. No property interest in having police enforce a (mandatory) restraining
order when state law preserved the traditional discretion of law
enforcement officials to take other factors into account (see Castle Rock
v. Gonzales).
3. Deprivation—requires more than mere negligent conduct by government officials, even though
such conduct causes injury (liability for negligently inflicted harm is categorically beneath the
threshold of constitutional due process)
a. Deprivation exists only if the government’s conduct “shocks the conscience”
i. Court does not want to “constitutionalize” tort law/remedies.
b. Ex. Fleeing suspect inadvertently killed during police chase (see County of Sacramento v.
Lewis)
i. Government official was “re”-acting to the situation, i.e. no time for deliberation.
1. But what if there is time for officials to ponder the consequences of their
action? If there is time, then the Court might find room for something
less than “conscience shocking”, i.e. gross negligence/recklessness to
constitute deprivation.
ii. Why bring Due Process with Tort Claim? Sovereign/Official Immunity hurdle.

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4. ELEMENTS OF DUE PROCESS

a. Notice—if government intends to do something [what’s the crime, how to get the
benefit/avoid punishment]
b. Hearing—(An opportunity to be heard)—an adversary, judicial-type hearing—whether
before or after deprivation of a protected liberty or property interest—is NOT required in
all circumstances. Rather, whether a prior evidentiary hearing is required, and the extent
of procedural requirements…
i. 3-Part Balancing Test (Mathews v. Eldridge)
1. The importance of the individual interest involved;
2. What is the risk of erroneous deprivation given existing procedures, and
how much will additional procedural safeguards minimize the risk of
error;
3. The government interest in fiscal and administrative efficiency
a. Fiscal/Administrative Burdens: if we have to do XYZ, it will
cost us too much money/burden of administering that program is
too great. [Factors the Court will always expressly consider]
ii. Purpose of Mathews: When is a hearing required, and what kind of hearing is
required? [Pre-Deprivation v. Post-Deprivation]
1. Timing
a. As a general rule due process requires a pre-deprivation hearing
of some kind
i. Determination is on a case-by-case basis using the 3-Part
Balancing Test above.
b. EXCEPTION
i. Impossibility—pre-deprivation hearing not required
when doing so is impossible (Hudson v. Palmer)
2. Kind
a. Not a full evidentiary hearing, but what kind of hearing/example
of hearing not covered in class
c. Before a “Fair and Impartial” Decision Maker—this also was not discussed at any
length in class.
_____________________________________________________________________________________

ELEVENTH AMENDMENT: (Sovereign Immunity/Litigating Against a State) the Eleventh

Amendment provides that “the judicial power of the United States shall not be construed to extend to any
suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another
state or by Citizens or Subject of any Foreign State.”
1. What kinds of suits against a State are prohibited? (General Rule)
a. Citizens of another state
b. Citizens/Subject of a foreign country
c. Citizens of the state (see Hans v. Louisiana), grounded in common law
i. Sovereign Immunity—cannot sue a State without its permission.
1. Problems? Should not contract with a State b/c if breach, cannot sue
State
d. Foreign Governments (see Monaco)
e. Native American Tribes (considered to be foreign sovereigns)
2. What kinds of suits are permitted?
a. United States (federal) can ALWAYS sue a State
b. Other States can sue other States—to enforce state obligations
i. Ex. MI can sue IN b/c they are co-equal sovereigns, claiming IN has encroached
on the border (obligation of MI)

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c. State has waived its immunity and consented

i. Rule for Waiver—must be…
1. Expressly stated within the four corners of State law (Ex. some State
statute, “State Tort Claims Statute”); OR
2. Absolutely no doubt in an implied waiver (practically, implied waivers
are almost never found)
a. Voluntary participation in a federal program does not mean that
the State implied waiver
3. “Constructive Waiver” IS NOT a waiver.
ii. Typically States waive immunity of construction/maintenance of state roadways.
d. Congress abrogates (overrides) State sovereign immunity, SEE MORE BELOW
i. Four Requirements (only addressed 2):
1. Plain Statement Rule—Whether Congress has “unequivocally
expressed its intent to abrogate the immunity”
a. Ex. “In any suit under this law, the state shall not bring
sovereign immunity”
2. Valid Source of Constitutional Authority—Whether Congress has
acted pursuant to a valid exercise of power
a. Cannot abrogate pursuant to Article 1 (i.e. not Commerce
Clause, Spending, Taxing)
b. Can only abrogate pursuant to 13th, 14th, 15th Amendments, why?
11th Amendment came after the text of the Constitution.
Reconstruction Amendments came after 11th Amendment.
3. Congress Must Demonstrate a Pattern or Practice of Discrimination
by the States Against Whatever Right the Federal Law Aims to
Protect
a. Congress documents pattern by holding hearings
4. Law Created to Protect Right Must be Congruent and Proportional
to the Harm Congress has Identified—
a. Ex. Voting Rights Act 1965, §5: preclearance requirement…if a
state is subject to requirement, then before that state can make
any change to voting rights law/regulations, must first preclear
with Justice Dept or Federal Court.
e. Ex Parte Young (1908): sue officer of state to prevent officer from enforcing a state law
that is unconstitutional, see more below.
3. What Constitutes the “State”? (General Rules)
a. State itself—State is the named defendant
b. Departments of the State Government (Ex. Treasury, Labor and Industrial Relations)
i. Sub-Department Level (Bureaus/Agencies/Committees/Panels/Commission)
—NOT THE STATE, but see Exception Below
c. Officers of the State—when acting within the scope of their duties is the State
i. Note—Officer of the state who is acting in individual capacity is NOT THE
STATE
1. Example: Governor drives herself (instead of driver), in the course of
driving to Capital; she runs stop sign and hits someone. She is acting
within the scope of her duties in transporting herself to her job. But if
she drove to get dinner, it is individual capacity.
a. Note—many states have “Official Indemnification Law”  if an
officer of the state acting in good faith and in scope of duties is
sued individually, the state will indemnify the judgment against
him (state will pay the judgment)…Catch—the statute, if it

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exists, does not convert the individual into a state officer, and
thus make that person a state subject to sovereignty immunity.
INDEMNIFACTION IS VOLUNTARY
d. CRITICAL—Political Subdivisions of the State ARE NOT THE STATE
i. Generally, cities, school boards, municipalities, counties do NOT get sovereign
immunity, but see Exception Below
e. EXCEPTIONS, SUBDIVISIONS—“Follow the Money”
i. Pennhurst State School & Hospital v. Halderman, funding for county program at
issue came from the State Treasury.
f. Normally counties do not get sovereign immunity, but when the state has to pay
any judgment against the county, extend the benefit of immunity to the county
itself.
g. IF JUDGEMENT AGAINST SUBDIVISION MUST BE PAID DIRECTLY BY
STATE, SUIT WILL BE BARRED.
4. Ex Parte Young (1908)—CRITICAL DECISION, state officials can be sued in an action for
prospective injunctive relief (equitable relief) or for monetary relief (legal relief) provided that
it comes from the officer, not the state treasury. The State of Minnesota has created an
unconstitutional state law (tariff law), violation of 14th Amendment Equal Protection; sue the
Attorney General for injunctive relief.
a. To Get Injunction—Substantial likelihood of success on the merits to get injunctive relief
b. Stripping Doctrine—when a state official attempts to enforce an unconstitutional state
law, that person is stripped of authority to act on behalf of the state, i.e. not acting as a
state official, but only acting in individual capacity.
c. Make it possible for individuals to challenge unconstitutional state laws.
d. SCOPES OF RELIEF (Edelman v. Jordan)—past monetary dues (i.e. DAMAGES) are
NOT recoverable from the State, only prospective relief.
i. Ancillary Relief Doctrine: if state is going to have to pay money for prospective
relief, that is okay. But, past due/retrospective dues are not recoverable.
_____________________________________________________________________________________

CONGRESSIONAL ENFORCEMENT OF CIVIL RIGHTS: ABROGATION CONTINUED…

1. Under the Enabling Clause in §5 of the 14th Amendment: Congress has power to remedy and
prevent violations of equal protection and due process
a. Rights: existence of rights determined by Article III Courts.
b. Scope of Power: the power under the Enabling Clause to remedy/enforcement and 14th
Amendment violations includes prohibiting some conduct that is not itself
unconstitutional. Remedies may be legislated for prior violations or to prevent future
violations (e.g., congressional ban on English literacy tests for voting upheld even though
the Court would not have held such tests unconstitutional)
i. Limitations—Congress has no power to expand substantive constitutional rights;
it can only fashion a remedy for an already-existing right, and the remedy must
be congruent and proportionate to the injury (narrowly tailored).
c. Government v. Private Action: although state action is required for violation of 14th
Amendment, certain private action (e.g., by state or local officials, private citizens
collaborating with officials, and perhaps private individuals alone) may be remedied by
Congress’s broad power under 14th Amendment Enabling Clause.
i. The Court has held that the Constitution itself empowers courts to recognize a
cause of action for money damages against federal officials.
d. Religious Impairments:
i. City of Boerne v. Flores (1997)
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a. Law is religiously neutral, and

b. Generally applicable
2. Congress responds with Religious Freedom Restoration Act to re-impose
a strict scrutiny standard to a state law that substantially impairs free
religious exercise
3. In Boerne, Court continues to use rational basis test. Article III courts get
to determine which rights and scope of rights are under the 14th
Amendment.
a. Congress can only pass laws to enforce the rights that the Courts
say exist
e. Age Discrimination: Kimel v. Florida Board of Regents (2000)
i. Rational Basis Review
ii. State employees cannot sue employers under ADEA (elevated review)
iii. ADEA is unconstitutional because Congress attempted to change scope of
protection for age discrimination
f. Disability Discrimination: Board of Trustees of Univ. of Alabama v. Garrett (2001)
i. Court held that Title I of ADA as applied to states exceeded Congress’ §5 power
1. Discrimination based on disability receives rational basis review
g. Fundamental Rights: Tennessee v. Lane (2004)
i. Title II of ADA bars discrimination in public accommodations of disabled people
1. Case isn’t just about disability discrimination (which would apply
Rational Basis); this case is about access to government building that
houses the government court system [Access to the Courts].
2. Standard of Review (for access to the courts): same standard as
discrimination based on gender…
a. Intermediate Scrutiny
i. More than Rational Basis
ii. Less than Strict Scrutiny
ii. ADA simply enforces the right of access to the courts.
2. Under the Enabling Clause in §2 of the 15th Amendment: Congress has broad power to prevent
government racial discrimination in voting.
a. The test is whether Congress could rationally find that the conduct or practice it seeks to
prohibit or regulate has been or may be used to deny voting rights on the basis of race
i. Discriminatory Effect: even though voting regulations that have only a
disproportionate racial impact (but are not intentionally discriminatory) might
not violate the 15th Amendment, Congress may prohibit such regulations in areas
“with a demonstrable history of racial discrimination” in voting.

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ANALYTICAL MODELS (i.e. Attack Outline)

1. Jurisdiction? (Original or Appellate)
a. Subject Matter Jurisdiction? (Congress exceptions?)
2. Is the claim justiciable?
a. Political Question
b. Ripeness
c. Mootness
d. Abstention
e. Prereqs for hearing State court decisions
3. Standing

Commerce Clause Question

1. Channels
a. Does it cross, did cross, or will it cross a state line
2. Instrumentalities
a. Persons or things in interstate commerce
3. Intrastate/local activities that substantially affect interstate commerce
a. Lopez/Morrison Test: 4 factors

Does Regulation Violate Federalism

1. Commandeering overwhelming issue
a. Court never expressly overruled Garcia
i. Thus, apply both Garcia political process AND commandeering analysis

Conditional Spending
1. Dole Requirements

Executive Model
1. Start with Youngstown Approach
a. Start with Category 1, then to 3, then to 2
2. If foreign affairs or diplomatic matters
a. Also apply Curtiss-Wright Analysis
i. Y1, do need to mention
ii. Y3, will not tip the scales in favor of constitutionality
iii. Y2, will most likely tip scale in favor of constitutionality

Preemption: (intent is always the key issue)

1. Express Intent (Preemption Clause which purports to override state law)
a. If yes, fed law controls to the extent of preemption
b. If no, state law may still be preempted
2. Implied Intent
a. Field Preemption
i. Does fed law occupy entire field of the law?
ii. Look to…
1. History and tradition of fed control of area
2. Comprehensive uniform fed regulatory scheme
3. Expression of intent to completely occupy an area of law (in preamble)
4. How important is the state interest? Should it override fed interest?
b. Conflict Preemption
i. Is there a conflict b/t state and fed law?
1. Two Types

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a. Impossible to comply with both state and fed law

b. Compliance with state law frustrate the purpose of fed law

Dormant Commerce Clause Doctrine (ARGUE BOTH SIDES FOR EXAM)

1. State Discrimination Against Interstate Commerce, WHEN CONGRESS HAS BEEN SILENT
(Burden is on the Challenger)
a. YES, it “Facially”, “Purposely or Effectually” Discriminates
i. Burden Shifts to State
ii. Strict Scrutiny Test
1. Is there a compelling (legitimate, non-protectionist) government interest?
a. Often assumed for purposes of analysis
2. Is there a less discriminatory alternative?
a. This is where the law fails
b. NO, it Only Incidentally Restricts/Burden Interstate Commerce
i. Burden Stays with Challenger
ii. Pike Balancing Test
1. Is there a legitimate government interest?
2. Is burden clearly excessive in relation to the local benefit of the law?
c. Exceptions to Dormant Commerce Clause Doctrine [Maybe start with this analysis?]
i. Has Congress authorized the discriminatory state law
1. Federal Statute
a. Validity of statute
i. Commerce Clause Analysis
ii. Is the State a market participation
1. Enters market to buy/sell goods
2. Limitation
a. State can only discriminate within participating market
iii. Is the government undertaking traditional government functions
1. Engages in function (determined by the court)
2. State regulates to favor that function
3. If all others are treated the same
4. THEN, no discrimination
5. Just mention that Pike might apply.
d. FOR EXAM, ADDRESS ALL EXCEPTIONS (whether or not state regulation
discriminates)
e. Even if State law survives dormant commerce clause analysis, must still satisfy other
constitutional requirements, especially
i. Art. IV Privileges and Immunities
ii. 14th Amendment Equal Protection Clause
iii. But only address these IF MENTIONED IN CALL OF QUESTION

WATCH OUT FOR…State passes law that discriminates against interstate commerce…
Analyzes whether state law survives commerce clause review? Still apply dormant commerce
clause doctrine analysis

State Action (BUT see outline for depth and understanding)

1. Private actor is engaged in a governmental function
a. Conduct that is traditionally and exclusively performed by the government
i. If yes—state action
1. Running town/running elections/running parks
ii. If no—go to second part

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1. Schools, shopping centers, public utilities, dispute resolution

2. The government has entangled itself with a private actor by actively
a. Has government actively authorized, encouraged, or facilitated the conduct
i. Government a joint participant in the conduct
ii. Government acted to enforce private discriminatory conduct
iii. Government action facilitated or encouraged
b. If yes—state action
c. If no—no state action
i. Subsidies alone not state action
ii. Regulation alone—even if extensive—not state action
iii. Monopoly alone not state action

Abrogation of State Sovereign Immunity

1. Whether Congress may unilaterally abrogate state sovereign immunity and provide a cause of
action for violation of a federal right
a. Does Congress have power (Seminole Tribe)
b. What is the scope of the power (City of Boerne)
2. Questions
a. Plain Statement Rule—Has Congress clearly expressed intent?
i. May be at issue on exam
ii. If no—Congress may not unilaterally abrogate
iii. If yes—move on
b. Has Congress acted pursuant to an appropriate source of authority?
i. 13,14,15 Amendments—valid b/c they all post-date 11th Amendment
ii. If no—Congress cannot abrogate
iii. If yes—move on
c. Has Congress identified some harm—a pattern and practice of conduct by the States that
violates a federally protected right?
i. If no—Congress cannot abrogate
ii. If yes—move on
d. Is the remedy congruent and proportional to the harm Congress identified?
i. If yes, Congress can unilaterally abrogate.
1. Examples: Voting Rights Act, Family and Medical Leave Act,
Americans with Disabilities Act (Title II)
2. Factors:
a. Imposed only upon states that violate the law
b. Remedy tailored to meet specific harms
c. Limited to a term of years or until states comply

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CONSTITUTIONAL LAW II OUTLINE

Professor Philip Prygoski, Hilary Term 2010

PROCEDURAL DUE PROCESS: (5th and) 14th Amendments: “No…State [shall] deprive any person of
life, liberty, or property, without due process of law.” This situation occurs when the government is going
after one person (not a group, for group see Substantive Due Process)
5. Life—simply means life.
6. Liberty—the right to be free of physical restraints imposed by government in both the
noncriminal and criminal context. Includes the right to contract and to engage in gainful
employment (see Board of Regents v. Roth, refusing to rehire Roth did not violate due process).
b. Prison, Involuntary Commitment to Mental Institution
c. Defamation by Government—includes the right to be free from defamation by a
government official, when such defamation is made public and occurs in connection with
denial of some significant tangible interest.
i. Defamation resulting only in damage to one’s reputation is NOT a denial of
“protected” liberty (see Paul v. Davis)
ii. Defamation resulting in mere loss of public employment w/o publicity is NOT a
denial of “liberty” (see Bishop v. Wood).
e. Affirmative ability to “do stuff” (George Carlin-esque)
7. Property—more than ownership of realty, chattels, or money. It also includes “entitlements”—
i.e. “interests already acquired in specific benefits.” There must be a legitimate claim to the
benefit under applicable local, state, or federal law/statute (unilateral expectation will not suffice)
b. What entitlements? Contract/Rule/Regulation/Policy/Longstanding government practice
can create an entitlement
i. Examples
1. Public Education (when school attendance is required)
2. Continued Welfare (government) Benefits (if applicant meets statutory
criteria)
ii. Non-Examples
1. To defeat entitlement, put it in writing/the contract/policy (“at-will”
employment)
2. No property interest in having police enforce a (mandatory) restraining
order when state law preserved the traditional discretion of law
enforcement officials to take other factors into account (see Castle Rock
v. Gonzales).
8. Deprivation—requires more than mere negligent conduct by government officials, even though
such conduct causes injury (liability for negligently inflicted harm is categorically beneath the
threshold of constitutional due process)
c. Deprivation exists only if the government’s conduct “shocks the conscience”
i. Court does not want to “constitutionalize” tort law/remedies.
d. Ex. Fleeing suspect inadvertently killed during police chase (see County of Sacramento v.
Lewis)
i. Government official was “re”-acting to the situation, i.e. no time for deliberation.
1. But what if there is time for officials to ponder the consequences of their
action? If there is time, then the Court might find room for something
less than “conscience shocking”, i.e. gross negligence/recklessness to
constitute deprivation.
ii. Why bring Due Process with Tort Claim? Sovereign/Official Immunity hurdle.

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9. ELEMENTS OF DUE PROCESS

a. Notice—if government intends to do something [what’s the crime, how to get the
benefit/avoid punishment]
b. Hearing—(An opportunity to be heard)—an adversary, judicial-type hearing—whether
before or after deprivation of a protected liberty or property interest—is NOT required in
all circumstances. Rather, whether a prior evidentiary hearing is required, and the extent
of procedural requirements…
c. Before a “Fair and Impartial” Decision Maker—not pre-decided, biased in favor of
one party or another
d. Mathews v. Eldridge 3-Part Balancing Test [Is person receiving enough process?]
i. The importance of the individual interest involved (right being affected);
ii. What is the risk of erroneous deprivation given existing procedures, and
how much will additional procedural safeguards minimize the risk of error;
iii. The government interest (in fiscal and administrative efficiency)
1. Fiscal/Administrative Burdens: if we have to do XYZ, it will cost us too
much money/burden of administering that program is too great. [Factors
the Court will always expressly consider]
e. Purpose of Mathews: When is a hearing required, and what kind of hearing is required?
[Pre-Deprivation v. Post-Deprivation]
i. Timing
1. As a general rule due process requires a pre-deprivation hearing of some
kind
a. Determination is on a case-by-case basis using the 3-Part
Balancing Test above.
2. EXCEPTION
a. Impossibility—pre-deprivation hearing not required when doing
so is impossible (see Hudson v. Palmer)
ii. Kind
1. Not a full evidentiary hearing, but what kind of hearing/example of
hearing not covered in class
_____________________________________________________________________________________

SUBSTANTIVE DUE PROCESS REVIEW OF FUNDAMENTAL RIGHTS: whenever a

government regulation abridges a fundamental right, the Court will use strict scrutiny to review the law.
The fundamental right may be enumerated (Bill of Rights), or unenumerated (such as the right of
privacy). A right will be fundamental if it is “essential to an Anglo-American system of jurisprudence” or
“implicit in the concept of ordered liberty.” [This situation occurs when the government is going after a
class/group of people]
1. Pre-Substantive Due Process Courts
a. Slaughter-House Cases, 83 U.S. 36 (1873), cases involving the pursuit of an occupation
i. Privileges and Immunities Clause of 14th Amendment deals with national
citizenship. There has only been one right protected under the Privileges and
Immunities Clause  “Right to Interstate Travel” (see Saenz v. Roe)
ii. Should have tried under the Due Process, pursuing occupation as aspect of liberty
2. Economic and Social Regulations: (enter into contracts, pursue business (not privacy interests)
a. Lochner v. New York, 198 U.S. 45 (1905)—the “freedom to contract” (liberty interest,
near fundamental, under the 14th Amendment) may be restricted through the state’s
police power to protect public health, safety, welfare, or morals, but the means must
be reasonably related to a legitimate end. [Substitution of Justices opinion in place of
legislature] “Legislature cannot pass laws for the common good”

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b. Modern Approach—the Court defers to legislative judgments in respect to economic

and social regulations unless they are “demonstrably arbitrary or irrational” (see Duke
Power Case). Such laws are presumed valid and will be upheld unless no reasonable
state of facts can be conceived to support them, or unless they bear no rational
relationship to the end sought.
i. Nebbia v. New York (1934): economic interests are not fundamental.
ii. Effect of Approach: under this modern approach, public health and safety
measures—as well as various regulations of business, such as the following—are
effectively immune from a general Due Process Clause attack: price controls (see
Nebbia), trade practices (see North Dakota Board of Pharmacy), wage and hour
laws (see West Coast Hotel Co.), bans on discrimination against union or
nonunion employees (see Lincoln Federal Labor Union), limitations on engaging
in certain occupations (see Williamson).
c. Footnote 4 of the Caroline Products Case—in cases about economic or property rights,
the Justices would defer to the political process. But when it came to laws that appeared
to be targeted at racial minorities or other “discrete and insular minorities,” the Court
would apply “more searching judicial scrutiny.”
i. This footnote was largely written by Louis Luskey, a clerk to Chief Justice
Harlan Fiske Stone in 1937
3. Fundamental Personal Rights: fundamental rights may be enumerated or unenumerated.
Enumerated rights are those provisions of the Bill of Rights that are so important that they are
applied against the states as well as against the federal government. Unenumerated fundamental
rights are rights that are not listed in the Constitution, but have been deemed by the Court to be so
important as to be protected by the Constitution against government intrusion.
a. Enumerated Rights
i. All of First Amendment rights
ii. Fourth Amendment search and seizure
iii. All of Fifth Amendment rights (except grand jury requirement)
iv. All of Sixth Amendment rights
v. All of Eight Amendment rights
b. Unenumerated Rights
i. The right of privacy;
ii. The right to interstate travel;
iii. The right to vote; and
iv. The right of political association
c. Determining Whether Unenumerated Fundamental Right Exists—the right is
“essential to Anglo-American jurisprudence” (i.e. all or most of the States have
recognized the right) or “implicit in the concept of ordered liberty.”
i. Look to History and Tradition of Anglo-American jurisprudence [Main Test]
1. Look to common law/colonies/England/the States over time to protect
right
2. When does pattern become tradition?
ii. Look to the Constitution
1. The Fourteenth Amendment
a. Substantive Due Process deals with rights (of everyone)
b. Equal Protection deals with classes (analysis applied when
“similarly situated” in relation to the purpose of the law)
i. Suspect Class (Strict Scrutiny)
1. Race/Ethnicity/Alienage (by States)
ii. Quasi-Suspect Class (Intermediate Scrutiny)
1. Gender/Illegitimacy

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iii. Non-Suspect Class (Rational Basis Scrutiny)

1. Economic/Poverty/Sexual Orientation/Alienage
(by federal government), what’s not b (i, ii)
c. Fundamental Rights Strand of Equal Protection: If you have
a non-suspect classification that “significantly interferes” with
the “exercise of a fundamental right”  strict scrutiny applies.
iii. Look to Natural Law (highly criticized)
iv. Look to Other Nations
4. Unenumerated Fundamental Rights:
a. Right of “Privacy”/Zones of Privacy (“Autonomy” or “Personhood”)—there is no
right to privacy enumerated in the Constitution. The Court has offered different doctrinal
bases for the existence of such a right (recognized within the “penumbras” of various
provisions of the Bill of Rights, as well as the 9th Amendment, see Griswold v.
Connecticut). More recently, it is accepted that the right of privacy is an aspect of liberty
protected by the due process clauses.
b. Right to Make Decisions Concerning the Care/Custody/Control of Children:
i. Right to Direct Educational Upbringing of Children: parents have a right to
determine which schools their children will attend (see Pierce v. Society of
Sisters)
ii. Grandparent Visitation: a state may not grant broad-based non-parental visitation
rights only upon a showing that the visitation would be in the best interest of the
child (see Troxel v. Granville, not striking down the visitation rights but only that
the law was overly broad and vague)
1. Might be on EXAM, distinguish between visitation rights and broad law
iii. No Right to a Public School Education: there is no right to a public school
education. State methods of funding education receive rational basis review
iv. Quilloin v. Walcott (1978): Due Process would be offended if the State were to
attempt to force the breakup of a natural family, over the objection of the parents
and their children, without some showing of unfitness and for the sole reason that
to do so was thought to be in the children’s best interest.
v. Michael H. v. Gerald D. (1989): a possible biological father does not have a
fundamental right to obtain parental rights (i.e. fundamental right of parenthood)
after the presumptive father has exercised significant responsibility over the
child. KNOW FOR EXAM
1. Footnote 6 Clash of Jurisprudences: Justice Brennan says the
right/tradition is “parenthood,” and should protect the natural father’s
rights. Justice Scalia says to look at the rights/tradition of an “adulterous
natural father,” giving Michael no constitutional rights.
a. How do you define the scope of rights? Narrowly OR Broadly?
i. Possible Exam Q: How do you define marriage?
vi. Family Living Arrangements: protected interest to live with one’s family, with
heightened scrutiny (see Moore v. East Cleveland).
1. How do you define family (extended family)?
2. Zoning (Choice of Household): rational-basis scrutiny, but be careful of
zoning laws that operate against fundamental rights.
a. Zoning of free speech establishments
c. Right to (Marriage and) Procreation: the Court has recognized marriage and
procreation as fundamental rights protected by Due Process Clauses of the Constitution
(see Skinner v. Oklahoma).
i. Many states have laws on the books (not enforced) that make procreation for
unmarried persons illegal.

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ii. Is “Cloning” procreation, such that it is a fundamental right?

iii. Is “IVF” procreation?
iv. Individual right to procreate separate from marriage (Eisenstadt)? Yes!
d. Right to Marry: the Court has held that the right to marry is an aspect of liberty
protected by the Due Process Clauses of the Constitution (see Loving v. Virginia and
Zablocki v. Redhail)
i. But what is the definition of “marriage”? Two consenting adults who want to
establish relationship v. one man, one-woman
ii. Only some regulations of the right to marry are subject to strict scrutiny under the
Equal Protection Clause
iii. Gay Marriage: liberty interest, but not a fundamental right
iv. Bigamy: multiple marriages? Not protected
e. Contraception (Right NOT to Procreate): the right to purchase, receive information,
and use contraceptives has been found to be included with the right of privacy (see
Griswold v. Connecticut, where the Court held that the statute infringed on a
constitutionally protected “zone of marital privacy”).
i. Unmarried Couples—see Eisenstadt v. Baird (1972), extension of right to
unmarried couples to use contraceptives (under Equal Protection, married and
unmarried are “similarly situated”)
1. Foresee the Next Issue: Non-Procreative Sex with Contraceptives v.
Homosexual Intercourse [see below]
ii. Minors—under Carey v. Population Services Intern., minors have a
constitutional right (not fundamental) to access to contraception. But less
rigorous standard than strict scrutiny (kids not similarly situated to adults when
dealing with contraception).
iii. Davis v. Davis—(Tennessee Supreme Court) right not to procreate is greater than
right to procreate if a conflict exists between them, unless woman has no other
option of getting pregnant.
f. Abortion (Right to Decide Whether or Not to Terminate a Pregnancy)—The standard
announced in Casey: a state may not pass a law which, by purpose (facial) or effect (as-
applied), imposes an undue burden on a woman’s decision to terminate her pregnancy.
After viability, states can regulate, and even prohibit, abortions, but there must be an
exception to the life (and health) of the mother (see Gonzales v. Carhart).
i. ON EXAM  If undue burden exists, law is bad; no rebuttal by State
ii. Determining Viability: A state may not unduly interfere with the attending
physician’s judgment as to whether there is a reasonable likelihood of the fetus’s
survival outside the womb (24-28 weeks).
iii. Defining Undue Burden: Undue burden has been defined as a "substantial
obstacle [major impediment] in the path of a woman seeking an abortion before
the fetus attains viability” (see Planned Parenthood v. Casey).
iv. Determining Undue Burden: a law that serves a valid purpose does not impose
an undue burden simply because it has the incidental effect of making it more
difficult or expensive to procure an abortion. Neither does a law designed to
persuade a pregnant woman to choose childbirth over abortion impose an undue
burden unless it has the effect of placing a “substantial obstacle” in her path.
1. Not an Undue Burden
a. Informed Consent—a state may require a woman to give written
informed consent and require the physician to provide truthful
information about the procedure, mother’s health risks, and
probable gestational age of the fetus (must be “to protect the

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woman”). Okay as long as the purpose or effect is to dissuade

the woman’s choice.
i. Graphic pictures of aborted fetuses are not okay
b. Waiting Period (must always be discussed with Informed
Consent issues)—a state may impose a 24-hour waiting period
between consent and procedure (48-hour period for minors)
i. Might not be enforced against women without easy
access to hospitals (“as-applied” challenge struck down
law in Michigan)
c. Physician-Only Requirement—a state may require only licensed
physicians to perform abortions.
d. Minors—parental consent laws are invalid unless accompanied
by a judicial bypass procedure (but notification of both parents is
always invalid—minor might be live in a single-parent
household)
i. Judicial By-Pass—minor can go to court and have the
judge decide whether (1) she is competent to have an
abortion, and (2) what is in her best interest (totality of
the circumstances).
e. Government Funding of Abortion—woman’s right to decide
whether or not to terminate pregnancy is not violated by a State
law that refuses to fund welfare abortions (doesn’t coerce, thus
not an undue burden)
f. Public Health Reporting—age/health reports are okay, unless
identification of woman is reported, then violates privacy right.
g. Partial Birth Abortion Ban—is not an undue burden on the
woman’s decision.
i. Lack of exception for the mother’s health was okay
because medical opinion differs on whether it imposes a
risk to the mother [FOR FACIAL CHALLENGES]
1. But may still try to bring an as-applied
challenger
h. Doctors paid by State cannot perform abortions—okay
i. No abortions in city hospitals—okay
2. Undue Burden
a. Criminalizing Abortions—statutes are undue burdens
b. Spousal Consent—states may not require a woman to obtain the
consent of her spouse before she may have an abortion.
g. Physician-Assisted Suicide—the Due Process Clause of the 14th Amendment does NOT
create a fundamental liberty interest in physician-assisted suicide (see Washington v.
Glucksberg).
i. KNOW FOR EXAM
1. How to define this right; Broad or Narrow…
a. Right to determine the time and manner of one’s death (self-
determination) BROAD
i. Opens the door to justifying illegal drug-use
b. “Right to Die”, OR
c. Right to physician-assisted suicide, NARROW
2. Pg. 473—Rehnquist on Substantive Due Process
a. Right is, objectively, deeply rooted in the Nation’s history and
tradition, with a…

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b. Careful description of the asserted fundamental liberty interest

(i.e. narrow description).
h. Right to Refuse Unwanted Medical Treatment—the Court has recognized a low-level
liberty interest (not fundamental) in refusing medical treatment (see Cruzan v. Director,
Missouri Department of Health) [See Prygoski’s Law Review Article]
i. Rehnquist’s Authority—4th Amendment: Right to be secure in your person;
Common Law: Doctrine of informed consent  right of competent person to
refuse unwanted medical treatment
1. But what about incompetent people?
a. According to Brennan, do what’s in her best interest…
b. According to the Majority of the Court—State has an
unqualified interest in the preservation of human life.
ii. FOR EXAM PURPOSES
1. Counter-ArgumentStevens/Brennan: Is the quality of life after
accident declining such that constitutionally, a state cannot assert an
unqualified interest in her life? A state must define life in relation to the
person living it.
a. Constitutional Tradition: interest in dignity, and to define one’s
own concept of existence.

CONSERVATIVE THOUGHT (State has an unqualified interest in preserving human life

along the entire spectrum)

[Pregnancy]___[Viability]____[Birth]__________________[Accident]_______[Death]

LIBERAL THOUGHT (State’s interest does not have the same force in all cases, must
balance the State interest with the quality of life)

[Birth]_________________________________________[Accident]
/ \
[Viability] \
/ \
[Pregnancy] [Death]

i. Refuse Lifesaving Treatment BUT Prohibit Physician-Assisted Suicide—under the

Equal Protection Clause, there is a rational distinction between (i.e. not similarly situated)
a patient refusing unwanted lifesaving medical treatment, and a patient receiving
assistance in committing suicide (see Vacco v. Quill)
i. Causation of death is different, as well as the affirmative and negative action for
each causing the death
j. Adult Consensual Homosexual Activity—the Court held that a state statute making it a
crime for two persons of the same sex to engage in certain intimate sexual conduct is an
abridgement of liberty (not fundamental) protected under the Due Process Clause, always
apply Rational Basis Scrutiny (see Lawrence v. Texas overruling Bowers v. Hardwick).
i. Argument Against Right: state’s interest falls within the state’s police power to
protect public health, safety, welfare, or morals.
1. Response 1: relying on morals may be an establishment of religion
2. Response 2 (Kennedy in Lawrence): no legitimate interest justifying the
intrusion into the personal and private life of the individual.

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a. I.e., on balance, morality is not a sufficient justification for

intruding (criminalizing conduct) into the personal and
private life of the individual in the privacy of the home
i. But what about other sexual acts between two
consensual adults? Mentioned by Scalia in Lawrence
1. Bigamy (financial reasons?)
2. Adult incest (health reasons?)
3. Prostitution (this is COMMERCIAL and can be
regulated)
4. Obscenity (not protected by 1st Amendment)
ii. These examples can still be illegal if the justification is
something other than morality.
3. Steven’s Dissent in Bowers: the right to engage in nonreproductive,
sexual conduct that others may consider offensive or immoral is
protected.
ii. Rights Within the Home/Other Cases Somewhat Relatable
1. Stanley v. Georgia (1969): right to view pornography/have obscenity in
one’s own home [Right to be secure in one’s own home]
a. DISTINGUISHED by Majority in Bowers (b/c Stanley was a 1st
Amendment case…bullshit, because obscenity was not protected
under the 1st Amendment and the holding relied on the “home”
aspect) but later UNDISTINGUISHED in Lawrence.
iii. FORESEE GAY MARRIAGE: looking at civil component of marriage.
1. How do you define marriage?
a. Liberals—Two consensual adults in a committed relationship
b. Conservatives—Man and woman
2. Is procreation the primary purpose of marriage? NO!
a. Love and Companionship
b. Infertile/sterile couples are allowed to marry
c. Old people are allowed to marry
d. Couple not wanting children
e. Atheists have no religious affiliation
3. Are homosexuals and heterosexuals who never want to have children
similarly situated for purposes of marriage?
a. History and tradition
i. Procreation
b. Implicit in the concept of order liberty
i. Security, love, companionship
c. Is there some non-moral reason for prohibiting gay marriage
i. OR is this a secular morality
4. Fundamental Rights Strand of Equal Protection
a. Homosexuals may be a non-suspect class but the right to marry
is fundamental???
5. Distinguish with Lawrence
a. Lawrence criminalized conduct
b. Gay marriage prohibited by State but not criminalized

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_____________________________________________________________________________________

APPROACH TO SUBSTANTIVE DUE PROCESS ISSUES

Is a fundamental right (e.g., privacy, travel, equal voting) involved?
/ \
NO, liberty interest YES
(Economic, commercial interests/Poverty, sexual orientation) |
| |
Rational Basis Test Strict Scrutiny Test
Is the government action rationally relates to a Is the government action necessary to achieve a
constitutionally permissible government compelling government purpose?
purpose?
(Burden of proof is on the challenger) (Burden of proof is on the government)
/ \ / \
Yes No Yes No
| | | |
the action is the action is the action the action is
constitutional unconstitutional constitutional unconstitutional

CHALLENGER has initial burden of proof for prima facie case, then…

Strict Scrutiny: burden of proof shifts over to the government, and the government has to show that there
is a compelling reason for the law and that it has means narrowly tailored to achieving the compelling
interest [law presumed invalid]

Rational Basis Scrutiny: burden of proof remains with the challenger to show that government has no
legitimate interest or the means were not rationally related to achieving the interest [law presumed valid]
- Legitimate Interest: Within the state’s police (safety, public health, welfare, public morals)
- Rationally Related: law arguably furthers the legitimate interest [not arbitrary and
capricious]

Plaintiff has initial burden to establish prima facie case (an arguable claim, pass summary judgment for
civil case, “laugh test”). Plaintiff must also show that a right exists.

MUST TALK ABOUT MICHAEL H. and GLUCKSBERG IF FACED WITH SUBSTANTIVE DUE
PROCESS QUESTION ON THE EXAM [How do you define a fundamental right? Broadly or
narrowly?]
_____________________________________________________________________________________

FOR ABORTION QUESTION

1. Start with distinction between…
a. Pre-viability  undue burden test
i. Define undue burden
ii. Provide examples of some undue burdens and analogize
b. Post-viability  can regulate or prohibit b/c of compelling interest in life of fetus

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_____________________________________________________________________________________

THE EQUAL PROTECTION CLAUSE—the Court reviews legislation to see if a government is

intentionally discriminating against a class of people entitled to special constitutional protection (similarly
situated people in relation to the purpose of the law must be treated the same).
1. Classifications
a. Suspect Class (Strict Scrutiny)—race/ethnicity/alienage (sometimes)
b. Quasi-Suspect Class (Intermediate Scrutiny)—gender/illegitimacy
c. Non-Suspect Class (Rational Basis Review)—age/wealth/mental status/sexual
orientation//socio-economic status/alienage (sometimes)
2. To make a prima facie equal protection argument, a plaintiff must show disparate impact
and intent [the Constitution only prohibits intentional discrimination] (De Jure v. De Facto)
a. Disparate Impact—to demonstrate disparate impact, the plaintiff must prove that the law
disproportionately burdens a particular group.
b. Intent—means that the government intended to discriminate against a class because of a
specific trait such as race or gender.
i. How to show intent?
1. Facial Discrimination—by looking at the obvious language of the
statute, the statute “on its face” discriminates against a group of people.
a. Ex 1. Black people cannot attend U of Texas Law School
b. Ex 2.Whites cannot marry blacks
2. As-Applied (Facially Neutral) Discrimination—while not
discriminatory on its face, enough circumstances exist so that a
reasonable inference of intent exists. [As applied, the statute
discriminates against a target class motivated by a discriminatory
purpose]
a. Plaintiff may show intent by looking at…
i. Unequal Application—intent may be shown by the
manner in which a facially neutral law is applied (see
Yick Wo v. Hopkins).
ii. Statistical Evidence—numbers alone are NOT enough
to show intent (see Washington v. Davis)
iii. Factors/Circumstances—the Court has identified
several factors to consider when trying to prove intent
1. Statistical Evidence—Numbers alone only show
disparate impact, but cannot show intent alone
2. Legislative history—Legislative minutes,
memos, emails
3. Departure from normal procedures in enacting
the law
4. Degree or Foreseeability of the disparate impact
of the law—if the disparate impact is unusually
severe and was easily foreseen by the legislators
who passed the law, a court may consider those
factors when determining whether intent exists.
3. Laws That Discriminate on the Basis of Race and Ethnicity (History)
a. Art. 1 §2 (Missouri Compromise), Art. 1 §9, Art. 4 §2  Dred Scott v. Sandford (1957)
 13th Amendment (1865)—abolished slavery
b. Plessy v. Ferguson (1896)—Separate-But-Equal Doctrine satisfies the Equal Protection
Clause of the 14th Amendment; an invitation to discriminate
i. Harlan’s Dissent—The Constitution is “color-blind”

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1. Now used as an argument against affirmative action

c. Korematsu v. United States (1944)—interned individuals of Japanese origin/ethnicity
[matters because of Racial Profiling]
i. NOTE: Constitution means different things during “war times”
ii. Government classifies…
1. Prospectively—prevent something in the future
a. Can be over or under inclusive
i. Ex. Drunk-Driving
1. Don’t sell alcohol to those who will
drink/drive/cause accidents…IMPOSSIBLE to
determine this group of people
ii. Proxy Classification: 1) minors, 2) repeat offenders.
2. Retroactively—defined by the conduct/crime
a. Virtually neither over or under inclusiveness
iii. For Racial Classification, the law has to be narrowly-tailored (i.e. NOT
prospective classification)
1. Court simply changes the standard law has to be necessary to the
compelling interest
d. Brown v. Board of Education (I) (1954)—overruled Plessy; segregation in public
schools is unconstitutional
i. Footnote 8 (p.1208): development of law toward Brown…Gaines, 1938: need a
school equal to white school; Sweatt, 1950: Texas Law School was superior in
factors other than simply bricks and books.
ii. NO FUNDAMENTAL RIGHT TO PUBLIC SCHOOL EDUCATION
1. But, “…education is perhaps the most important function of state and
local governments.”
2. “Separate educational facilities are inherently unequal”
e. Bolling v. Sharpe (1954): The Fifth Amendment contains an Equal Protection
Component (NOT CLAUSE) of the Due Process Clause under the guarantee of
“liberty.”
f. Brown (II) (1955)—Delivers the order, “…with all deliberate speed…”
i. Gives school districts time to comply to maintain legitimacy in the Court.
ii. ISSUES PERTAINING TO BUSING OF STUDENTS TO OTHER DISTRICTS
g. Loving v. Virginia (1967): Standard of Review: Strict Scrutiny  Fundamental Right to
Marry, AND Race as a Suspect Class
4. Post-Brown Remedies for School Segregation—Decrees of the Court are inherently deficient,
because they do not reach everyone that contributed to the segregation (i.e. Parents/Zoning
Boards/Realtors/Mortgage Lenders ALL effect the discrimination in public education)
a. Disparate Impact
i. Look across the school district and you see many schools are primarily white and
how many schools are primarily black (Dual-School-System)
b. Intent
i. Southern Cases—Many southern states wrote into their laws the discrimination
in education (facial discrimination  easy to spot the intent).
1. IF there is a Statute or Constitutional Provision AND that it was on the
books as of Brown (I), there is a presumption of intent
ii. Northern Cases—never wrote it down (i.e. facially-neutral)
1. Feeney (1979)—circumstantial evidence that would lead to an inference
of intent
c. Equitable Powers of Federal District Judge to Remedy Segregation—
i. Swann v. Charlotte-Mecklenburg Bd. of Educ. (1971): FOUR STEPS

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1. Transportation of Students—the Supreme Court affirmed busing as a

remedy for the segregation the court found
a. How do you bus?
i. Cross-District Busing: is NOT okay WHEN the other
district(s) were never part of the lawsuit and haven’t
been shown to discriminate. I.E. NOT NARROWLY
TAILORED
1. Had the other districts been parties to the
lawsuit, then you can have cross-district busing
2. Racial Balance or Racial Quotas—strict racial balancing/quotas cannot
be used, but may be effective place to start analysis
3. Remedial Altering of Attendance Zones—non-contiguous attendance
zones, as interim corrective measures, were within the courts' remedial
powers
4. One-Race Schools
ii. JUDGE’S POWER IS TO REMEDY PROVEN DISCRIMINATION
iii. Oklahoma City Bd. of Educ. v. Dowell (1991):
1. The district court could remove the injunction upon finding that that the
school system was being operated in compliance in “good faith” with the
Equal Protection Clause, and that it was unlikely that the Board would
return to its former ways.
a. Rehnquist—Looks only at the discrimination of the school board
and whether they remedied their discrimination in compliance
with the order.
b. Dissent, Marshall—Looks at “conditions” likely to inflict
stigmatic injury.
i. Thus, cannot lift decree if other factors (i.e. parents)
affect discrimination.
5. Affirmative Action and “Benign” Discrimination—an affirmative action program is a
governmental program which gives a preference to members of specified racial or ethnic groups.
Race-based affirmative action programs receive strict scrutiny: the government has the burden of
showing that the program is narrowly tailored to achieve a compelling government interest.
a. Precursor Case—Palmore v. Sidoti (1984): white child of white parents; parents
divorce, court denies child custody because mother marries black man; court said you
cannot make the decision solely on the basis of race
i. But can race be a FACTOR? Yes, race may be a factor, but not the sole factor.
ii. For Scalia, if race is the “tipping” factor, then race is essentially the sole factor.
b. Affirmative Action (in Education)
i. Two Types of Affirmative Action Policies (Strict Scrutiny applies to both)
1. Court-Ordered
a. Remedial—remedy for some court determined violation in the
past.
i. Compelling Interest—remedying past intentional
discrimination
2. Voluntary
a. Remedial—same as above in court-ordered, making up for
something in the past.
i. Richmond v. Croson (1989): making up for societal
discrimination does not count as a compelling interest
for remedial, voluntary affirmative action program.

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ii. MUST SHOW— Firm basis in evidence to show

passive participant in a prior system of identified
discrimination (O’Connor, J.).
1. NOTE: If passive participant, cannot be sued
under 42 USC §1983 AND allows cities to have
voluntary, remedial programs.
a. Passive = unintentional, thus no
violation of §1983
b. Non-Remedial—no judicial finding of past discrimination. The
school implements voluntary race-based affirmative action.
c. State Race-Based Affirmative Action Plans in Education Cases
i. Regents of the University of California v. Bakke (1978)—the Court held that the
exclusion from a program based solely on race is illegal, even if the purpose of
the exclusion is to increase the number of racial minority members who
participate in the program [Racial quotas are bad]
1. Establishing diversity in the student body is a compelling governmental
interest of the university sufficient under strict scrutiny review to justify
the use of racial preferences in admissions…if DEFINED properly.
2. What does diversity mean? Not just race, but individuals with varying
backgrounds and viewpoints.
a. Geography, economic status
3. Pursuant to the First Amendment, universities have the right to select
those individuals that will contribute the most to the robust exchange of
ideas
4. Dissent: Theory for LOWERING the Level of Scrutiny—whites as a
class are not suspect such as to be subjected to strict scrutiny; no history
of being in the position of political powerlessness.
a. Should apply intermediate scrutiny
ii. Gratz v. Bollinger (2003)—compelling interest in assembling a racially and
ethnically diverse student body, but the points system was not narrowly tailored
to achieve that goal.
1. Points only ensure the racial make-up of the freshman class.
iii. Grutter v. Bollinger (2003)—the law school took a more holistic approach,
taking race as only a factor for diversity, but not a decisive factor.
1. Achieving diversity through Critical Mass  meaningful
representation…enough so that individual minorities do not feel
insolated.
iv. Parents Involved in Community Schools v. Seattle School Dist. No 1—the
Court struck down voluntary plans adopted by the public school districts that
assigned pupils to schools on the basis of race
1. Compelling Interest—diversity in higher education (narrow definition)
a. K-12 is not higher education, and thus not a compelling interest.
2. Concurrence, Kennedy, J.—diversity, depending on its definition and
meaning, is a compelling educational goal a school district may pursue.
a. Diversity means something different when talking about law
school and kindergarten. ALL ABOUT HOW YOU DEFINE IT.
3. Dissent, Breyer, J.—motive and context behind the regulation/law is
important in making your decision [look at the group, NOT the kid]
a. Exclusion of Children (like Brown)—strict scrutiny
b. Inclusion of Children—intermediate scrutiny

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c. QUESTION: who is being excluded and included? Depends on

who is bringing the claim. White kid is excluded for the black
kid being included.
i. What level of abstraction?
1. Inclusion when looking macro (GROUP)
2. Exclusion when looking micro (KID)
4. EXAM QUESTION: who had it right? Roberts or Kennedy/Breyer?
a. Roberts—strict scrutiny under any racial classification and
compelling only for higher education
i. Letter of Brown
b. Kennedy/Breyer—lower level of scrutiny depending of inclusion
v. exclusion.
i. Spirit of Brown
ii. And don’t forget idea in Bakke, that white class is not
suspect class.
1. Context of the laws and motivation
a. Also an issue for same-sex
marriage…context = define marriage as
one man/one woman OR two people
committed to each other.
d. Affirmative Action in Employment
i. Wygant v. Jackson Board of Education—cannot impose burden on innocent
white teachers.
1. Is diversity among faculty a compelling interest?
a. Would require holistic review
ii. Petit v. Chicago Case—Chicago race-based placement for cops in the south-side
(used diversity argument for police force)
1. REMEMBER—Diversity in COP CAR is different than diversity in
LAW SCHOOL.

FOR THE EXAM

1. Determine the suspect class
2. Disparate Impact, Intent
3. Similarly situated in relation to the purpose of the law
4. Government interest

Remedial (past societal discrimination not compelling) v. Non-remedial programs

ANY heightened scrutiny  burdens shifts to government

Gender Discrimination Test (Craig v. Born case): substantially related to important government interest;
alternative  exceedingly persuasive justification for the law

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_____________________________________________________________________________________
FREEDOM OF SPEECH—intent to convey a particularized message was present, and the likelihood
was great that the message would be understood by those who viewed it (“message intended; message
received”)
 RAY’S OVERVIEW OF SPEECH
a. Content-Based Regulation
i. General Rule—If government is trying to regulate (intended or designed)
content of speech = strict scrutiny
1. Two Types of Content
a. Subject (government regulating based on the large category)
i. Subject: War
b. Viewpoint (instead a category of speech and the government has
chosen a side, punishing the other side)
i. Viewpoint 1: war effectively resolves disputes
ii. Viewpoint 2: war is ineffective at resolving disputes
c. Government has more leeway in regulating subject content
b. If not Content-Based  Intermediate Scrutiny
i. Regulating the TIME, PLACE, or MANNER in which you speak
1. HOWEVER, Place may be the Content…changing the location of the
speech changes the content of the speech (the message trying to be
conveyed is not the same)
a. Ex. Prohibiting speech/protesting near a political convention
ii. Regulating Symbolic Speech/Conduct (O’Brien Regulations)
iii. Regulating Obscene Speech
iv. Regulating Commercial Speech

1. (Substantial) Overbreadth Doctrine—a party whose conduct would otherwise be unprotected

may challenge a statute if it purports to punish or restrict a substantial amount of protected
speech.
a. Facial Challenge to the Law
i. Class Example. Locality passes a law prohibiting pornography. A person
producing obscene material challenging law prohibiting pornography.
ii. Book Example. See Board of Airport Commissioners v. Jews for Jesus, Inc.
(1987): the Court invalidated an airport authority regulation that prohibited all
First Amendment activity in the airport terminal
b. Statute cannot survive facial review if there are no factual issues to which it can be
applied
2. Vagueness Doctrine—arises when a statute or regulation has no standards, or insufficient ones,
to guide the government official applying the law. The absence of notice to the person is
compounded by the excessive discretion vested in the government.
a. Ex. Disorderly Conduct
3. Unprotected Speech (Content-Based Restrictions on Speech)
a. Inciting Illegal Activities
i. The Brandenburg Incitement Test—(see Brandenburg v. Ohio) the government
may prohibit a speaker’s advocacy of an illegal action if…
1. It is intentionally directed at inciting or producing imminent lawless
action, AND
2. It is likely to incite or produce such action by audience
ii. The speech must be directed to a specific person or group (see Hess v. Indiana).
(The Brandenburg Test replaced the old “Clear and Present Danger” Doctrine)

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iii. FUTURE LAWLESS ACTION: The Dennis Test

1. The gravity of the evil discounted by the improbability of the speech.
b. Fighting Words, Offensive Speech, Hate Speech, and Hostile Audiences
i. Fighting Words Test—words which “by their very utterance inflict injury or
tend to incite an immediate breach of the peace” (see Chaplinsky)
ii. Offensive Speech—
1. See Cohen v. California—“Fuck the Draft.” The expletive is protected
speech; it was not directed at anyone
a. Courts are permitted to establish rules to comport activity
prohibiting offensive speech (time/place/manner regulation) that
is content-neutral.
2. Government can regulate indecent and profane speech over traditional
broadcast media
iii. Hate Speech—offensive speech that is derogatory or demeaning toward racial or
ethnic groups, as well as gender and sexual orientation groups. Hate speech
cannot be an independent crime.
1. Content-Based Restrictions on Hate Speech—the government CANNOT
selectively ban certain categories of fighting words based on their
content (R.A.V. v. St. Paul)
a. Psychic trauma/emotional harm is NOT a significant evil
b. Public expression of ideas may not be prohibited merely because
the ideas are themselves offensive to some of their hearers
(Collin v. Smith).
2. Threats—a state may ban “true threats” which include cross burning
carried out with the intent to intimidate (Virginia v. Black).
3. Hateful Beliefs—a person cannot be punished for abstract beliefs, no
matter how reprehensible or anti-social (Dawson v. Delaware).
c. Obscenity—obscenity is limited to works that depict or describe sexual conduct (sexual
conduct must be specifically defined by state law) [Pornography is Protected Speech]
i. The Miller Test—(see Miller v. California)
1. Whether the average person, applying contemporary community
standards, would find that the work, taken as a whole, appeals to the
prurient (excessively sexual) interest;
a. Prurient interest  determined by prevailing local standards,
interests to whom the material is intended to appeal
2. Whether the work depicts or describes, in a patently offensive way,
sexual conduct specifically defined by the applicable state law;
a. Patently offensive  determined by prevailing local standards
3. Using a reasonable person standard (not contemporary community
standards), whether the work, taken as a whole, lacks serious
literary, artistic, political, or scientific value (SLAPS)
a. National standard
b. Nudity alone is not obscene
[The distribution of obscenity is not the issue, the viewing of the obscenity is.]
ii. Dean Ray’s (Better) Definition of Obscenity: I KNOW IT WHEN I SEE IT…
probably hardcore pornography, making a longshoreman blush.
1. Justice Potter Stewart’s concurrence in Jacobellis v. Ohio (1964)
iii. Private Possession of Obscenity—individuals have a protected right to possess
and view adult obscenity in the privacy of his or her home (see Stanley v.
Georgia)

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1. HOWEVER, there is no right purchase obscenity, no right to have

obscenity mailed to you.
iv. Commercial Exhibition of Obscenity to Consenting Adults—the government
may prohibit the showing of obscene films in a movie theater restricted to
consenting adults (see Paris Adult Theatre I v. Slaton)
d. Child Pornography—not judged by same standard of obscene speech
i. There is no right to sell or privately possess child pornography (see Osborne v.
Ohio, (1990))
1. State’s interest in preventing the sexual exploitation of children is so
great that it overrides a person’s interest in the possession of child
pornography.
ii. What is Child Pornography?
1. State law must adequately define conduct including sexual conduct, to be
prohibited
2. Offense must be limited to works that “visually depict sexual conduct by
actual children below a specified age”
a. I.e. government cannot prohibit…
i. Computer-generated child pornography
ii. Adults dressing and acting like underage children
e. Defamation—covered in Torts II
4. Prohibition on Symbolic Speech—symbolic speech is speech engaged in through conduct
a. O’Brien Four-Part Test—(see U.S. v. O’Brien)
i. Is the law within a constitutional power of the government?
1. Ex. Power to raise and maintain army during wartime  power to draft
2. Ex. School board  10th Amendment
ii. Does the law further an important or substantial government interest?
iii. Is the government interest unrelated to the suppression of free expression?
1. I.e. is it content-neutral? [CHECK FIRST]
a. Must be content-neutral for this test to apply
iv. Is the incidental restriction on speech no greater than essential to furthering
the government interest?
1. Are the means narrowly tailored?
b. Application—Cases
i. Draft-Card Burning (see US v. O’Brien)
ii. Flag Burning
1. Texas v. Johnson—content-based restrictionstrict scrutiny
a. Nothing intrinsically wrong with flag-burning
i. Federal law allowed “respectful” flag burning
5. Time, Place, and Manner Restrictions (see Renton v. Playtime Theatres, Inc.) If the
government is not completely prohibiting speech, but is just restricting its time, place, or manner,
the Court uses the following four-part analysis…
a. Four-Part Test:
i. Is the law content-neutral?
1. The government cannot regulate the speech just because it does not like
it
2. Two Tests for Content-Neutrality
a. Law does not look at content, operates irrespective of content
b. Predominate concern of law to go after “Secondary Effects”—
allow court to regulate.
3. Examples: a rise in crime, drop in property values

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a. Brennan Dissent in Renton—crime and property values are only

compelling interests (uphold under strict scrutiny)
4. TECHNICALLY ONLY USED BY COURT IN FIRST
AMENDMENT-ZONING CASES
ii. Does the government have a significant or important reason for the law?
iii. Are the means narrowly tailored to achieve the asserted interest?
iv. Are there ample alternative channels of communication available?
1. Government must leave available other ways for the speaker to
communicate.
2. Only difference between this test and O’Brien Test is this element.
b. FOR THIS TEST TO APPLY—RESTRICTION MUST BE CONTENT-NEUTRAL
6. Commercial Speech—advertisement for product or service. Just because money is involved,
does not mean it is commercial speech (NY Times charges money)
a. ON EXAM, TALK ABOUT CENTRAL HUDSON
b. Central Hudson Test—see Central Hudson Gas & Elec. Corp. v. Public Serv. Comm’n
i. Does the First Amendment protect the expression?
1. Advertisement must…
a. Concern lawful activity; and
b. Not be misleading.
2. If commercial speech is not misleading, and is an advertisement for a
lawful product or service, continue onto the next three elements…
ii. Does the government have a substantial reason for the regulation?
iii. Does the restriction directly advance the government interest?
iv. Is the restriction narrowly tailored to achieve the government interest?
 I.e. (1) does the advertisement concern lawful activity, and is it misleading; (2) substantial
government interest; and (3) narrowly tailored to achieve that interest.
7. Prior Restraint—a prior restraint is any government action that stops speech before it can be
communicated.
a. Injunctive Orders Imposing Prior Restraints
i. Perpetual Injunction Against a Newspaper—a court may not perpetually
enjoin the publication in a newspaper of any malicious, scandalous, or
defamatory material (see Near v. Minnesota)
ii. Publication of the Pentagon Papers—the Court refused to enjoin the
publication of the Pentagon Papers (pertaining to the Vietnam war) absent a
compelling reason for the injunction (see New York Times Co. v. U.S.)
1. I.e. Strict Scrutiny (PR has high presumption of invalidity)
b. Licensing System as Prior Restraint
i. For a movie-licensing system to pass constitutional muster, the government
has the burden (1) of proving the work is obscene, (2) must promptly go to
court or issue the permit or license, and (3) must ensure that there is a
prompt, final judicial decision regarding the alleged obscenity of the work
(see Freedman v. Maryland, and Times Film Corp. v. Chicago).
c. Informal Prior Restraints—a state may not use its power to informally influence what
books may be sold.
i. It is unconstitutional for a state commission to threaten obscenity
prosecutions against booksellers who sell books from a state compiled list of
objectionable books (see Bantam Books v. Sullivan).
d. Contractually Agreed Upon Prior Restraints
i. It is permissible for the CIA to require that its employees get agency
approval before publishing a book about activities that occurred during
their employment with the CIA (see Snepp v. U.S.).

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1. Compelling Interest  secrecy of information needed for national

security/confidentiality necessary for the functioning of an intelligence
agency.
8. Public Forum Analysis—public forum analysis is called for whenever a person is speaking on or
by means of public property. The goal of public forum analysis is to balance a person’s right
to use public property for speech purposes against the government’s right to maintain the
property for its intended use.
a. Types of Public Forums
i. Tradition—a traditional public forum is government property that has
historically been used for speech purposes (public streets, sidewalks, parks, and
public amphitheaters).
1. Speaker has presumptive right of access to traditional public forums for
speech purposes.
a. Government restricting content-based speech in trad. pub. forum
i. Strict Scrutiny
b. Governments typically channel speech in certain ways by
employing a time, place, or manner restriction.
i. SEE FOUR-PART TEST ABOVE 5(a)
ii. Government Designated Public Forums—a state may designate property to be
a public forum, as well as un-designate it to its prior, non-speech use.
1. Designated Open Forum—same rules apply as in the traditional public
forum.
a. Content-Based Restrictions  Strict Scrutiny
b. Time, Place, or Manner Restrictions  Four-Part Test
2. Designated Limited Forum
a. Content-Based Restrictions  Strict Scrutiny
b. Time, Place, or Manner Restrictions  Four-Part Test
c. Total or Selective Content-Neutral Restrictions of Speakers 
Rational Basis
i. Rationally related to the legitimate government interest
in maintaining the normal, non-speech use of the public
property.
iii. Commandeered Public Forum—a speaker may go onto public property to
speak even though the property is not a traditional public forum, and the
government has not designated the property to be a forum for speech purposes.
1. Courts look to see if the manner of expression is basically incompatible
with the normal activity of the government property at the time the
speech is engaged in.
a. If compatible, property will be considered public forum
b. Application of Public Forum Analysis
i. Handbilling on Public Streets—a city may not totally prohibit handbilling on
public streets (see Schneider v. Irvington).
1. Preventing litter was not sufficiently important to justify a total ban on
distributing handbills.
ii. Picketing Near Schools—a city may not selectively prohibit picketing near a
school (see Chicago Police Department v. Mosley).
1. Content-based restriction; must survive strict scrutiny
iii. Airport Terminals—government-owned airport terminals are not public forums
for speech purposes; therefore, the government may prohibit activities that are
inconsistent with the use of the terminals, like soliciting money from flyers (see
International Society for Krishna Consciousness v. Lee).

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1. Prohibiting Distribution of Religious Literature—violates free speech

9. Speech in Public Schools
a. Non-School-Sponsored Speech
i. The Tinker Test (see Tinker v. Des Moines School District)
1. Substantially interferes with the work of the school or impinge upon the
rights of other students (rights of kids to be left alone)
a. Objective indicator that trouble may be imminent
b. Hostile educational environment
c. Political speech is the most protected
2. What about vulgarity in non-school-sponsored speech?
a. School can regulate/prohibit
i. Ex. Student wearing shirt that says “Fuck Algebra”
ii. “Bong Hits 4 Jesus” Morse v. Frederick
1. Schools may prohibit speech that promotes/advocates illegal drug use,
regardless of whether the speech will be successful
b. School-Sponsored Speech
i. The Hazelwood Test (see Hazelwood School District v. Kuhlmeier)
1. If the school sponsors the student speech, content-neutral restrictions
may be imposed if they are reasonably related to a legitimate educational
or pedagogical interest.
a. Student Speech—newspaper, yearbook, student assembly
b. Educational/Pedagogical Interest—teaching journalistic ethics,
or the ability to engage in civil discourse in public gatherings.
2. Schools can regulate vulgar, lewd, and plainly offensive speech (see
Bethel School District No. 403 v. Fraser)
3. Regulate the manner of conveying the message, not the message itself.
c. Removal of Books From a School Library
i. The Pico Test (see Board of Education v. Pico)
1. If the school board removes books from a school library, its decision will
be upheld if content-neutral, and reasonably related to a legitimate
educational or pedagogical goal (such as ensuring that vulgar or grade-
appropriate books are not available to students).
a. Board CANNOT remove books because they disagreed with the
ideas expressed

_____________________________________________________________________________________
APPROACH TO FREE SPEECH FOR EXAM
1. Is it speech? Yes, it will always be speech on the exam
2. Look for applicability of vagueness and/or overbreadth doctrines
3. Does the regulation prohibit speech? Or is it just moving it around (i.e. time/place/manner)?
_____________________________________________________________________________________

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_____________________________________________________________________________________
FREEDOM OF EXPRESSION & ASSOCIATION—there is no right of association enumerated in the
Constitution. The Court has afforded constitutional protection to different kinds of associational rights.
NO FUNDAMENTAL RIGHT TO HANG OUT WITH PEOPLE.
1. Association for First Amendment Purposes
a. If people associate for First Amendment purposes (speech or assembly), the Court may
recognize a fundamental freedom of expressive association.
b. The right is not absolute, and may be abridged to advance a compelling government
interest.
2. Right Not to Associate, or Be Associated With, Certain Ideas—The court has recognized a
right not to be associated with certain ideas or speech.
a. Cases
i. Right of public school students to refuse to salute the flag (see West Virginia
State Bd. of Educ. v. Barnette)
ii. The right to speak and the right to refrain from speaking are complementary
components of the broader concept of ‘individual freedom of mind’ (see Wooley
v. Maynard)
1. License plates
b. Public Accommodations Law—force groups to accept others for membership and
participation in “open, recreational event”  implicates right to not associate with certain
ideas
i. Hurley v. Irish-American Gay Lesbian and Bisexual Group of Boston
1. Parade Permit  Boston created a limited public forum, private speech
2. Public Accommodations Law prohibits discrimination
3. Speaker won, public accommodation law lost
c. Compelled Monetary Subsidies—government forces you to contribute money for
speech you do not agree with (pg.1011)
i. Union Dues—may be compelled to pay service fees to union (for labor
management, etc.) (see Abood v. Detroit Bd. of Educ.)
1. CANNOT be spent to advance political views opposed by a union
member (unless established rebate system)
ii. Bar Dues
iii. Mandatory Student Activity Fees
3. Political Association—fundamental, unenumerated right, gathering for political purposes, mainly
joining a political party.
a. Restriction/Punishment for Joining Party—strict scrutiny
b. Right to Become a Candidate—strict scrutiny
4. Intimate Association and Expressive Association (penumbral rights)
a. Intimate—small group (form of social association)
i. TEST: To qualify, the group has to be…
1. Relatively small;
2. High degree of selectivity in membership;
3. Exclusive in its operation, seclusion from others in critical aspects.
a. I.e., no open meetings/media
ii. Example: Detroit Athletic Club
1. Issue: public accommodations law
a. Right of intimate association abridged  city needs compelling
interest
b. Expressive—Fundamental Right, i.e. strict scrutiny. Forced membership may change the
group’s message, abridging their freedom of expressive association.

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i. TEST (?): to challenge public accommodation law under fundamental right of

expressive association (changing the message), the challenger must…
1. Show what the message is (what they are expressing)
a. This can differ between who is making the argument
2. The inclusion of other members would directly and materially change
that message
If the message is changed…
3. State must than have a compelling interest to counter the fundamental
right (and usually, the compelling interest trumps the change in the
message)
a. Note: eradicating discrimination based on sexual orientation is
not a compelling interest.
ii. Example: Public accommodation law requiring KKK to open membership to
Blacks. This changes the message of the Klan, violating their expressive right.
1. Who wins? Compelling interest in eradicating racial discrimination, but
the Klan’s message is directly and materially changed…
5. Freedom of Association and Employment
a. Rule—unconstitutional to fire based on political association/affiliation if non-
policymaking/non-confidential employee.
i. But can be fired based on your political association if you are in a policymaking,
confidential role. Political affiliation may be an essential part of the job
1. Example: Chief US Attorneys across the nation fired/resign with a new
president
b. Government worker, when can you be fired for you speech?
i. If you work for the government, the government wears two hats: government and
employer
ii. Right to speech, until you interfere with the job (see Rankin v. McPherson).
1. Workplace must be able to function
2. Similar to viewpoint discrimination
a. Private conversation with a friend, cannot be fired
iii. Test
1. Look to see if the speech was a matter of public concern or private
concern
a. Public Concern: Cannot be fired on a public matter because
boss does not like/disagrees with the speech
i. UNLESS, government can show that the speech disrupts
the workplace
b. Private Concern: fired, not entitled to court hearing

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_____________________________________________________________________________________
FREEDOM OF RELIGION—the First Amendment says that, “Congress [or State] shall make no laws
respecting an establishment of religion, or prohibiting the free exercise thereof…”
ESTABLISHMENT CLAUSE—liberty, free from government/religion
1. Establishment Clause Tests—most used to least used
When Government Acts to Prefer or Advance Religion Over Non-Religion
i. The Lemon Test—when government acts to prefer or advance religion over non-
religion (see Lemon v. Kurtzman), if law fails one part, then there is an
establishment.
1. The law must have a (predominantly) secular (non-religious) legislative
purpose; (i.e. can also have a religious purpose)
BUT, if the purpose is predominantly religious, violates
establishment clause (see McCreary County v. ACLU)
2. Its principal or primary effect must be one that neither advance nor
inhibits religion;
Secondary effect may be to advance religion. When government
acts, it must treat religion like any other institution, i.e. cannot
discriminate against religion
3. It must not foster an excessive government entanglement with religion.
ii. The Lynch (Endorsement) Modification of Lemon—does government aid
endorse religion (see Lynch v. Donnelly), goes to “purpose and effect” prongs of
Lemon Test.
1. Whether a reasonable observer would perceive that the government is,
by purpose or effect, endorsing religion.
a. Reasonable person familiar with the full history and context of
government action
2. It must not foster an excessive government entanglement with religion.
iii. Historical Test—
1. Was the practice historically deemed permissible?
a. Issue: Christian practices v. Buddhist practices at time of
constitution ratification?
Government Money/Aid to Religion Test
i. Neutrality, i.e. “Add Other Stuff” Doctrine  give money to secular group in
addition to religious group
ii. Whenever you have money going from government to religion, what makes
it constitutional is “indirection”
1. Indirection means…government give money to private individuals, not
to the churches, and have the private individuals give the money to the
church [breaks chain of causation].
Religion in Schools
i. Coercion Test—Compelled student prayer in coercive setting violates
establishment clause????

Government Prefers One Specific Religion Over Another Specific Religion

i. The Larsen Test—(equal protection in disguise) apply Strict Scrutiny
1. See Larsen v. Valente

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2. Religion and Schools Cases

a. Financial Aid to Parochial School Students or Their Parents
i. Transportation—okay when class of beneficiaries included religious and non-
religious parents (see Everson v. Board of Education).
b. States may not require a minute of silence in public schools for “meditation or
voluntary prayer” if the sole purpose is to endorse religion (see Wallace v. Jaffree).
i. The addition of “or voluntary prayer” goes to the second prong of Lemon, which
has a principal, primary purpose of advancing religion
ii. ISSUE: Plead of Allegiance and “Under God” Part
1. Addition of Under God in 1954, but Rehnquist looks at the entire pledge,
not just the amended section [unlike the Court in Jaffree] (see Elk Grove
Unified School District v. Newdow).
c. Display Case
i. Look at facts: where is it put, what is the size
1. CAPTIVE AUDIENCE
ii. Ten Commandments w/note of “secular purpose” required by law  no secular
purpose underlying the law
1. But display of the ‘non-religious’ commandments (don’t kill, don’t steal)
are okay
d. Creationism v. Creation Science v. Intelligent Design = ALL RELIGION
e. Public Forum and Exclusion of Religious Speakers (“Speech + Religion”)
i. Designated Limited Forum
1. Content-based exclusion = strict scrutiny
a. Burden on the government (compelling interest = not
establishing religion with the religious speech)
i. Lemon used for compelling interest, to see if letting
religious speakers in establishes religion
1. LOOK AT ENTIRE PROGRAM
a. Is the purpose, effect
(advancing/inhibiting) of the
PROGRAM religious
2. Examples—Worship treated the same as speech
3. Official Acknowledgement of Religion
a. Acknowledgement = Neutral (not endorsed), but when does it cross the line?
i. NEED TO NEUTRALIZE IT  “Add Other Stuff” Doctrine
1. LOOK AT ENTIRE DISPLAY
2. Christmas tree is not religious (and predominant component in
comparison to smaller menorah)
a. But, if the menorah is bigger than tree = establishment
b. But, if menorah and tree are the same size = ???
b. Display of Ten Commandments
i. McCreary (at courthouse)—Not okay  then add smaller secular stuff, not okay
 then add equal size secular stuff, not okay…
1. The adding of secular displays AFTER the predominantly religious
display  trickle down effect of the non-secular purpose of the first
display.
a. Use Lemon, violates first prong
ii. Van Orden (22-acres of state capital grounds with 38 displays)—right-wing
plurality, chose not to use the Lemon test.
1. USED “Historical” Test—a little different, broad historical look between
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2. DISSENT: Stevens looked at the Ten Commandments only, not the

entire display of 38 monuments/historical markers
4. Prayer in Schools Cases
a. Cannot have prayer at graduation ceremonies for high school (see Lee v. Weisman)
i. If H.S. picked the four smartest students to speech at graduation, and one student
talks about religion…Okay?
1. Yes, neutral criterion for selecting speech
b. Unconstitutional for a public school district to allow student-initiated, student-led
prayer at high school football games (see Sante Fe Independent School District v. Doe)
i. Majority imposing its will on a minority
5. Ceremonial Deism
a. Uphold the Plead of Allegiance with 1954 amendment “Under God”
i. Used to solemnize the occasion

FOR ESTABLISHMENT QUESTION  ALWAYS TALK ABOUT LEMON AND MODIFICATION

FREE EXERCISE CLAUSE—right to practice religion

1. RULES
a. Government CANNOT inquire into the truth of religious beliefs, but CAN inquire
into the sincerity of the religious beliefs.
i. U.S. v. Kuch, 288 F.Supp. 439 (1968), Exaggerated Claims of Religious Beliefs
1. Some claims of religious belief just go too far.
b. Definition of Religion (Two Ways)
i. U.S. v. Seeger (conscientious objector case)—depends on whether a person’s
religious belief system fills the same place in his life as a mainstream religion
does in the life of one of its adherents.
ii. Attributes—(look to see what is in common)
1. A god; place of worship; text/holy book; rules; etc.
2. Employment Division v. Smith (criminalize the sacramental use of peyote case)
a. Three Categories
i. Generally applicable law challenged based solely on Free Exercise rights  A
generally applicable law that has only an incidental effect of burdening
religion does not offend the Free Exercise Clause.
1. Rational Basis Scrutiny Applies
a. Legitimate interest  “War on Drugs”
ii. Generally applicable law challenged under Free Exercise + some other
fundamental right…
1. Strict Scrutiny Applies (but would be applied regardless b/c the case
would involve a fundamental right)
a. Example: Wisconsin v. Yoder
i. Free Exercise + Right to Care, Custody, and Control of
Children
iii. Not Generally Applicable—Strict Scrutiny applies (two kinds of law)
1. If the law has hearings built-it (like unemployment compensation);
and
2. Laws that have built-in exceptions or exemptions (see Church of the
Lukumi Babalu Aye, Inc. v. Hialeah)
a. Animal sacrifice prohibited, but kosher slaughterhouses
exempted from law
b. If government prefers one religion over another, apply the
Larsen Test (i.e. also strict scrutiny)

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b. MUST TALK ABOUT (for free exercise) FOR EXAM PURPOSES

i. For exam, say there is substantial inference of religious exercise (no matter
what)
ii. Religion must require that you engage in the prohibited conduct.
iii. THEN look to which category applies...

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CONTRACTS I OUTLINE
Professor Mara Kent, Michaelmas Term 2009
LEGAL AUTHORITIES
1. Primary: Federal and State Constitutions, Common Law/precedent, StatutesUCC (state-by-
state in 1953) uniform statute that States could adopt (parts or entirety) for handling particular
issues in commercial law, Article II sale of goods (pg. xxxi).
2. Secondary (NOT LAW): (A) Restatement I (1932), Restatement II (1979), helpful and highly
persuasive for guidance to decide an issue, but judges are not bound. Rest II does not take
“precedent” over Rest I, the two mostly have the same definitions, w/some new developments.
(B) Treatises are a compiled work on a particular area of law.
3. Uniform Commercial Code (UCC) ARTICLE II: deals with the sale of goods (personal, not real,
property, i.e. chattels).
a. Goods defined in UCC §2-105(1): “Goods…means all things (including specially
manufactured goods) which are movable at the time of identification to the contract
for sale other than the money in which the price is to be paid, investment securities
(Article 8) and things in action (intangible property, like insurance policies). ‘Goods’
also includes the unborn young of animals and growing crops and other identified things
attached to realty as described in the section of goods to be severed from realty (Section
2-107)

TYPES OF CONTRACTS:
1. Formal: Contracts under seal (wax), the recognizance, the negotiable instrument (promissory
notes, and drafts)  not the subject of this course!
2. Informal (have the requirements been met?): Unilateral and Bilateral
3. Bilateral: Promise for a promise
4. Unilateral: promise for an act
5. Social Contracts: typically not litigated, unless business relationship with social contract

INTENT TO CONTRACT: Offer and Acceptance

THE PRINCIPLE OF MUTUAL ASSENT: offer and acceptance (through words or conduct), meetings
of the minds of all or both parties to a contract. Each agrees to all the terms and conditions, with the same
sense and same meaning as the others.
1. Express Contracts: if mutual assent is explicitly manifested in oral or written words of
agreement, the resulting contract is said to be express.
a. There is a sufficient objective manifestation of assent whenever a party uses an outward
expression (words or acts) that he knows, or has reason to know, the other party would
reasonably interpret as an offer or acceptance, and the other party does so interpret it
(Rest. 2d §19) (see Lucy v. Zhemer, undisclosed intentions are not sufficient).
2. Implied-in-Fact Contracts: If the promises of the parties are inferred from their acts or conduct
(surrounding circumstances), or from words that are not explicitly words of agreement, the
contract is said to be implied in fact. Although implied, such contracts are true contracts. The
mutual assent is inferred, but it is real, not fictional (Rest.2d§4).
a. See Stepp v. Freeman, “Lottery Ticket Case”
3. Implied-in-Law: one party is required to compensate another for a benefit conferred in order to
avoid unjust enrichment (basis for contract, not mutual assent). Implied in law contracts are not
real contracts.
a. Ex. Doctor providing services to unconscious man in street, man liable for reasonable
value of doctor’s services under an implied-in-law contract.
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OFFER: An “I accept”/”Yes-able” proposition. An offer creates a power of acceptance in the person to

whom the expression was addressed. If an offer, the addressee has the power to conclude a bargain (enter
into a contract and bind the offeror) merely by giving assent in the appropriate manner.
REQUIREMENTS (practically elements to prove):
1. Communicated to Offeree: offeror must be convey the offer to the offeree
a. Professional: guarantees by professional may be offer, not just opinion
i. Example: “We will win for sure”
b. Exception to Communication: Government Rewards
2. Definiteness of Terms: Generally, an expression will not be considered an offer unless it makes
clear: (i) the subject matter of the proposed bargain; (ii) the price; and (iii) the quantity
involved.
3. Commitment to Contract: look to verbs to determine commitment to contract: “I agree to sell”

WILL BE JUDGED BY AN OBJECTIVE STANDARD

1. Intent: Objective, when a party uses an expression (words or acts) that he knows, of has reason to
know, the other party would reasonably interpret as an offer under the surrounding
circumstances.
a. When the other party knows the expression is unreasonable, not offer. Unreasonable
meaning known to the other party.
2. Preliminary Negotiations: an expression that looks toward a bargain does not make the
expression an offer if it is clear from the language/circumstances that the expression reflects
merely the intent to begin negotiations (see PFT Roberson Inc. v. Volvo North America, Inc.)
a. Oral Agreement: determined by intent to bargain v. negotiations v. memorialized by
written agreement (see Stepp v. Freeman)
b. Written Contract to Follow: parties can make the execution of a written document a
condition precedent to the birth of a binding contract.
i. Factors for Intent (to be bound only by written contract):
1. Whether the contract is of a class usually found to be in writing;
2. Whether it is of a type needing a formal writing for its full expression;
3. Whether it has few or many details;
4. Whether the amount is large or small;
5. Whether the contract is common or unusual;
6. Whether all details have been agreed upon or some remain unresolved;
7. Whether the negotiations show writing was discussed or contemplated.

KNOWLEDGE OF OFFER: generally, offeree must communicate assent to offeror

Restatement (Second) §51: Effect of Part Performance W/O Knowledge of Offer: Unless the offeror
manifests a contrary intention, an offeree who learns of an offer after he has rendered part of the
performance requested by the offer may accept by completing the requested performance.
1. Rewards: calls for an act, not a promise
a. Private Reward  knowledge of offer required for acceptance before performance
b. Public (governmental) Reward  knowledge of offer NOT required
2. Generally, motive does NOT matter, as long as the requirements of acceptance have been met,
UNLESS, coerced or given out of fear of prosecution.

Advertisements: generally, ads are invitation for offers, NOT offers

1. Why? Over-Acceptance
1. Too Many Offerees
2. Insufficient Supply
2. Exception
1. If the ad is very specific as to price and quantity

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2. See Lefkowitz v. Great Minneapolis Surplus Store, Ad = offer

a. Positive Terms: CLEAR, DEFINITE, EXPLICIT, LEFT NOTHING OPEN FOR
NEGOTIATION

Auctions
1. With Reserve (Presumed)
b. Bidder Makes the Offer
c. Auctioneer can accept or not
2. Without Reserve
d. Auctioneer Makes the Offer
e. Item cannot be withdrawn after the first bid is received
3. In either type, bidders may withdraw their bid
4. UCC says Ringers cannot be used w/o notice. If they are:
f. Buyer can avoid sale, OR
g. Take the item at the last good faith bid
5. If a bid is made while the hammer is falling, the auctioneer may reopen bidding

OFFER OPTIONS
1. Option: an option sets the time for lapse, and the offeror has the ability to make it revocable
prior to acceptance.
a. Example: no consideration/acceptance to keep promise (keep offer open during time
frame) (see Dickerson v. Dodds)
2. Option Contract: means that the offeree has given (even nominal) consideration to the offeror
(an extra payment, or some other form of value) in return for a promise to keep the offer open and
irrevocable for a period of time.
a. A rejection or counteroffer by the offeree does not necessarily terminate the offer.
b. Promise to give consideration creates an option K
3. UCC §2-205: Firm “Merchant” Offer, for goods, if all elements are met then apply UCC, if not,
apply Common Law.
3. Offer—must be communicated, committed, definite
4. Goods (buy or sell)—moveable at the time of identification
5. By a Merchant—someone who deals with the kind of goods or by occupation has
knowledge or skill peculiar to the goods involved in the transaction.
6. Signed (symbol with intention to authenticate) Writing (print, typing, or any other
reduction to tangible form)
7. Gives Assurances—“offer is firm,” or “offer not to be revoked.”
8. CONSEQUENCES: offer is irrevocable, for lack of consideration, for specified time in
offer, or reasonable time if not specified, but neither will exceed 3 months (after 3
months  option, revocable by the offeror)
_____________________________________________________________________________________

ACCEPTANCE: Acceptance fixes the terms of the contract to those agreed upon in the offer. Once
acceptance, a party cannot unilaterally change terms of offer. Acceptance is a manifestation of assent by
the offeree to the terms thereof in a manner invited/required by the offer.
REQUIREMENTS (Elements):
1. ACT or PROMISE
a. Responsive to the Terms of the Offer: i.e. act called for, act given
i. Common Law acceptance is the mirror-image of the offer,
ii. UCC §2-207”Battle of the Forms” Page 18 of this Outline
b. Absolute and Unequivocal: “I accept” (look at the verb)
c. Communicated to the Offeror: this is the offeree’s manifestation of assent

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i. Determined by the Objective Manifestations

1. Actions of Parties
2. Inaction of Parties
a. See Silence as Acceptance
ii. Exceptions
1. Mailbox Rule
a. Mail or anything faster may be used, and acceptance is effective
when sent
i. Must be an acceptable means of communication
2. Termination by Death or Incapacity, the situation need not be
communicated to terminate the offer (does not terminate contract)
2. Intent To Accept: determined OBJECTIVELY by reasonable person/no hidden intentions
3. Acceptance Cements the Deal

MODE OF ACCEPTANCE:
Rest. 2d §50: Acceptance of Offer Defined
i. Manifestation of Assent: Objective Standard, accept offer in whatever manner that is required by
the offeror.
a. Unambiguous: manner indicated by the language of contract
b. Ambiguous (Suggested, but not exclusive): manner reasonable in the circumstances
Ambiguity will generally be construed against the drafting party.
i. Suggested, Not Exclusive: Acceptance by a manner and medium reasonable
under the circumstances. Particular method, or anything faster than suggested.
Offer sent by overnight express  reasonable = overnight express or faster, not
standard mail. Notification of shipment is not enough, requires notification of
acceptance.
ii. No Method Specified: Acceptance that is reasonable under the circumstances.
c. UCC§2-206:
i. Acceptance by Performance: requires at least part of what the offer requests be performed or
tendered and includes acceptance by a performance that operates as a return promise.
a. Unilateral Contract: performance is mandatory for acceptance; failure to complete act
does not breach the contract
i. Partial Performance: contract is formed when the offeree begins or completes
performance (see Machiondo v. Scheck); preparation for performance is not
sufficient.
1. When there has been partial performance, contract is now regarded as
being a contract with conditions or an option contract (see above in the
OFFER section of Outline); the condition is the full performance by the
offeree. No breach if failure to complete performance.
ii. Acceptance by Promise: requires that the offeree complete every act essential to the making of
the promise. (Bilateral Contract)
a. Bilateral Contract: Contract is formed once the promise is made/communicated.
Completion of contract requires every act promised to be performed. Performance/partial
performance w/o communication, NO contract. Breach if failure to complete the act.
i. In the case of doubt, an offer invites the formation of a bilateral contract (see
Davis v. Jacoby) Restatement ONE Presumption
iii. Silence as Acceptance: generally, silence/inaction does not constitute acceptance
1. Rest. 2d §69: Acceptance by Silence or Exercise of Dominion
(1) When offeree fails to reply to offer, silence/inaction is acceptance only when:
a. Benefit is received, knowing that the other party expects compensation (see
Day v. Caton, the built wall).

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i. Exception: opportunity to notify the other could only do so at the

expense of much time and trouble, inference might not be made.
b. It is understood that silence is acceptance (see Problem 15)
c. Course of Dealings  it is reasonable that offeree should notify offeror if he
does not intend to accept (see Problem 13)
(2) An offeree who does any act inconsistent with the offeror’s ownership of offered
property is bound in accordance with the offered terms unless they are manifestly
unreasonable. But if the act is wrongful as against the offeror, it is an acceptance
only if ratified by him (see last Q in Problem 13).
2. Postal Statute: Unsolicited items in the mail are gifts

UCC §1-205: Course of Dealing and Usage of Trade (Sp.223)

(1) A course of dealing is a sequence of previous conduct b/t the parties
UCC §2-208: Course of Performance (Sp.238)
(1) Any course of performance accepted or acquiesced in without objection shall be
relevant to determine the mean of agreement.
(2) Express terms of agreement and any such course of performance construed
reasonable when consistent with each other.
(3) Course of performance shall be relevant to show a waiver or modification of any
term inconsistent with such course of performance.
UCC §1-204: Time; Reasonable Time; “Seasonably” (Sp.223)
(1) Any time which is not manifestly unreasonable may be fixed by agreement
(2) Reasonable time for taking any action depends on the nature, purpose and
circumstances of such action
(3) Action taken “seasonably” when it is taken at or within the time agreed or if no time
is agreed at or within a reasonable time.
iv. The “Mailbox” Rule: acceptance is effective when the letter of acceptance is deposited in the mail
(see Morrison v. Thoelke),
1. Mail must be an acceptable means of communication (when the offer is delivered by mail, or if
the offer requests response/acceptance to be mailed  mail is an acceptable means)
2. MAILBOX RULE ONLY APPLIES TO ACCEPTANCE.
a. EXCEPTIONS (see hypos)
i. Race to the Offeror: if offeree first sends rejection/counteroffer before
acceptance, whichever is first
ii. If the Offeror relies on the received rejection
iii. Does NOT apply to option contracts (p.100)  Multiple Choice Q on Final

INDEFINITENESS
1. Common Law: generally, where there is uncertainty or ambiguity about price or quantity, courts
are reluctant to intervene and provide a remedy.
2. UCC Provisions: §2-204(3), contracts still exists when (1) parties intended to make contract, and
(2) there is a reasonably certain basis for giving an appropriate remedy
a. 1-205: Course of Dealings
b. 2-208: Course of Performance
c. 2-305: Open Price Term (reasonable price)
d. ?: Time (reasonable time)
e. 2-308: Place of Delivery (seller’s place of business)

TENDER: an unconditional offer to perform coupled with the demonstrated ability to carry out the offer
of performance and to produce the subject matter of the tender; i.e. showing the money, giving not
necessarily required (Common Law  Check or cashier’s check not sufficient, except under the UCC).

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TERMINATION OF POWER OF ACCEPTANCE:

Restatement (Second) §36: Methods of Termination of the Power of Acceptance
(2) An offeree’s power of acceptance may be terminated by:
a. Rejection by the offeree (SEE SLIDES)
i. General Rule: rejection by offeree terminates the power of acceptance
1. Exception 1: where the offer is kept open by an option contract or a
firm merchant offer
a. Exception to the Exception: unless the offeror relies (changing
position somehow) on the rejection.
2. Exception 2: Rest. 2d. §38
a. An offeree’s power of acceptance is terminated by his rejection
of the offer, UNLESS the offeror has manifested a contrary
intention (see Livingstone v. Evans, renewal of offer)
b. A manifestation of intention not to accept an offer is a rejection,
UNLESS the offeree manifests an intention to take it under
further advisement.
b. Counteroffer by the offeree
i. A counteroffer by the offeree (an offer by the offeree concerning the same
subject matter but containing different terms than the original offer) terminates
the power of acceptance.
1. A counteroffer creates a power of acceptance in the original offeror
a. HOWEVER, if original offeror responds to offeree’s
counteroffer, indicating only the original terms are offered, the
response is treated as a renewal of the original offer (see
Livingstone v. Evans)
2. Distinguish—Inquiries and Requests: power of acceptance is not
terminated by an inquiry regarding the offer or by a request for different
terms.
a. Test to Distinguish: whether a reasonable person would believe
the offeree’s communication was itself an offer inviting
acceptance.
ii. “Battle of the Forms”: SEE NOTES ON PAGE 18 of outline.
c. Lapse of Time, Rest. 2d §41
i. Where Time for Acceptance is Fixed in Offer: the offeree’s power of acceptance
lapses at the end of the stated period without any further action by the offeror.
Usually, the stated period runs from the time the offer was received.
ii. Where NO Time is Fixed in Offer: the offeree’s power of acceptance lapses after
the expiration of a reasonable time, which depends on the circumstances.
1. Reasonable Time: Typically Question of Fact, but, if it is so clear that no
reasonable juror would find time unreasonable, question of law.
a. Example: Bananas  shorter time, Computers  longer time.
iii. Face-To-Face: reasonable time lapses after conversation ends.
d. Revocation by the offeror (must be some how communicated)
i. Generally, an offeror can revoke an offer at anytime before a complete
acceptance, does not have to be an express and actual (unequivocal) withdrawal.
Indirect revocation from a reliable third party is sufficient for revocation (see
Dickerson v. Dodds). For exam, assume reliable
ii. Unilateral v. Bilateral
1. Exception: in the case of unilateral contracts, partial performance by the
offeree may bind the offeror to the offer (see Machiondo).

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a. However, preparation is not sufficient to make an offer for

unilateral contract irrevocable, unless the offeree’s preparation
constitutes reliance which might allow offeree to recover
reliance or expectation damages.
iii. Option v. Option Contract
iv. Firm “Merchant” Offer
v. Substantially Similar Publicity Rule: Mirror-Image revocation to the offer
1. Example: Offer poster in window for one year, Revocation poster must
be up in window for one year
a. If party sees revocation poster before accepting the offer,
revocation has been communicated, thus no offer.
e. Death or Incapacity of the offeror or offeree.
i. Restatement (Second) §48: An offeree’s power of acceptance is terminated
when the offeree or offeror dies, or is deprived of legal capacity to enter into the
proposed contract (terminates an offer, but NOT a contract or option contract).
_____________________________________________________________________________________

CONSIDERATION: explicitly bargained for benefit to the promisor OR an explicitly bargained for
detriment to the promisee that has legal value; quid pro quo (bargained for exchange, and have legal
value)
1. Traditional Consideration: Rest.2d §71  Quid Pro Quo
a. Sufficiency/Legal Value: means that the offered consideration must be something that
has value in the eyes of the law
i. The Following Have NO Legal Value
1. Love and affection and conjuring have no value in the eyes of the law.
2. No value for doing the obvious; idea must be new.
3. Teaching is an act that is of value (not claiming a right in what is being
taught)
b. Adequacy: refers to the quantity of the amounts exchanged; courts typically do not
inquire into the adequacy of consideration.
i. Exception 1—if subject mater is fungible for like fungible. Fungible—
something that is capable of being interchanged, e.g. wheat for wheat, apples for
apples (degrees in quality of some good is not capable of interchange, court will
not step in).
3. The exchange of the same currency is fungible; time value in context
may make same currency infungible as well.
a. Historical value of currency makes it infungible.
b. Acceptability of coins v. paper, may make infungible.
i. Exception 2: before decreeing specific performance with respect with land (in
equity  power of the court), conveyance of land for $1 = courts intervene.
b. Want of Consideration: no consideration to begin with (love/affection, no legal value)
c. Failure of Consideration: consideration is recited but never carried out (i.e. breach of
contract)
i. Example: “I’ll sell you my car for $500”, but you never pay.
d. Nominal Consideration: “in name only”; consideration must be bargained for.
Generally, nominal consideration is not truly bargained for.
e. Forbearance as Consideration: to forebear the legal right to do something, to sue on a
valid claim has value in the eyes of the law; an invalid claim has value provided that…
i. Person has honest and reasonable belief in validity of the claim, there will be
consideration.

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f. Illusory Promises: one whose fulfillment is optional or entirely discretionary on part of

promisor (key words: wishes or may choose). As long as there is some limitation on the
promisor’s future liberty of action = NOT illusory, and thus valid consideration. [NO
LIMITATION = ILLUSORY]
i. Exclusive Dealings: Wood v. Lucy and UCC §2-306: Implied good faith
limitations sufficient for placing reasonable obligations [UCC§1-203: every
contract or duty within this Act imposes an obligation of good faith in its
performance or enforcement]
ii. Output Contract/Requirements Contract/Continuing Offers: SEE
HANDOUT
iii. Imperfectly Expressed: everyone assumes that certain conditions are necessarily
implied (do NOT have to think of every contingency)
iv. VERY RARE THAT YOU WILL HAVE A CONTRACT THAT IS
ILLUSORY, courts typically will read in some implied good faith limitation.
v. ILLUSORY PROMISES AND ALTERNATE PROMISES
4. If a promise is illusory if it reserves a choice of alternate performances
UNLESS
a. If the two choices are separated by the word “or”, each choice
has value,
i. Example (a): I pay you $50 to (1) paint my house or (2)
wash car = K. I pay you $50 to (1) love me or (2)
wash car = NO K.
b. If the two choices are separate by the word “and”, only one or
the other choice has to have value
i. Example (b): I pay you $50 if you (1) love me and (2)
paint my house = K. I pay you $50 if you (1) love me
and (2) conjure spirits = NO K
g. Past Consideration: in order to be valid, consideration must be bargained for.
Consideration must take place after the agreement, and as such it is not bargained for
(e.g. a promise to take care of someone because of his many years of faithful
performance and service is not bargained for and has no value).
h. Preexisting Duty Rule: promise to do something that you already have a legal duty to
do has no value.
i. Exceptions: (1) promise something new, i.e. restructure or rewrite the K, and
promise something new or (2) rescind original contract and agree to a new
contract (as a practical matter, try to do this in the same document)
ii. Goods (UCC§2-209(1)): modification of contract needs no consideration if (1)
must be in good faith, and (2) must be some legitimate commercial reason.
[UCC§1-207 “Under Protest”]
iii. Restatement: When (1) unanticipated circumstances arise, and (2) no extortion
by a party, then the new contract is enforceable.
iv. Can have the same pre-existing duty under TWO CONTRACTS with TWO
DIFFERENT PARTIES.
i. Accord and Satisfaction (Past Due Monetary Debts)
i. Accord: agreement to modify contract or relation (whereby one party agrees to
give and the other party agrees to accept in satisfaction of a claim something
other than that which was originally agreed upon).
ii. Executory Accord: modification not carried out, i.e. in progress (the satisfaction
has not happened yet)…simply a type of bilateral contract.
1. Suspends
2. Substituted Contract: once contract made, no right to go back to the

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iii. Satisfaction: carrying out of the accord

iv. Because of the pre-existing duty rule an accord and satisfaction like any other
contract must have consideration in order to be enforceable
v. All parties have done is mutually agree to modify the original contract
vi. Disputed Debts: the debtor not have to pay anything until the debt is legally
resolved
1. Payment on a non-disputed debt is payment on account (it does NOT
discharge the original debt because of the preexisting duty rule), not
supported by consideration
2. Payment on a disputed debt will discharge the original debt because
there is no duty to pay the disputed debt until legally resolved [the giving
up of a legal right]
a. UCC §3-311: HANDOUT
2. Promissory Estoppel:
a. Charitable Subscription Cases = relating to “promissory estoppel” donate to a charity,
there is no expectation of something in return accompanied with that donation for the
donor, but the donee relies on the promise of donation [for exam purposes, assume non-
profit groups  charitable subscription]
1. Traditional Consideration: benefit/detriment bargained for, legal value (“true”
interlocking promises = consideration, look at intent of promisor, if the promisor
was going to give the money anyway = gift, and look to PE)
2. Promissory Estoppel WITH reliance (Rest.1)
3. Promissory Estoppel WITHOUT reliance (Rest.2d)
b. Interlocking Promise: there is traditional consideration (make sure that it is a true
interlocking promise, if the intent was to give the money anyway = gift, and must look to
promissory estoppel. How do you know their intent? Dispositions)
i. Example: A will give money to B if B can get C to donate money.
c. Some jurisdictions do NOT like PE, and only apply them to charitable subscriptions.
d. Extension of Doctrine: Negotiations, Proposals (no actual agreement), i.e. NO
CONTRACT, and yet PE is still applied to some of these cases (see Red Owl). “Promise”
does NOT mean “offer”, promise does not have to ripen into an offer. SUBSTITUTE
FOR A CONTRACT??? Not a “breach of contract” action.
i. Example: Construction, general contractor relies on sub-contractor’s price for
work without knowing whether or not they will get the job.

Comparison Between Restatements Promissory Estoppel

1. Promise
2. Which the promisor should reasonably expect to induce action or forbearance*(RI)
(Detrimental Reliance) on part of promisee* (RII)
* RI -- Action or forbearance must be of a definite and substantial character
* RII -- or Third Party
3. Which does induce reasonable action or forbearance (Detrimental Reliance)
4. Is binding if injustice can be avoided only by enforcement of the promise *
* RI -- does not have ¶ 2
5. RII -- The remedy granted for such a breach may be limited as justice requires.

3. Moral Obligation: applies to subsequent promises to pay…

a. Debts barred by the Statute of Limitations
i. If a debt is barred by the SOL, and AFTER the SOL runs, someone makes a
promise to pay the debt, this is considered a voluntary revival of the original
debt. Out of “equity”, the court will enforce that subsequent promise to pay.

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b. Debts barred by bankruptcy

i. If the bankrupt promises to pay after the debt was discharged in bankruptcy, then
he will have a moral obligation to make good on that promise.
c. Debts barred by infancy (under the age of 18)
i. No capacity to enter into contract (unless for necessity: food, shelter). Once the
minor reaches the age of majority, he can subsequently make good on his
promise to pay the debt. If he does, he will have a moral obligation to pay the
debt now that he’s of the age of majority.
d. Material Benefit (SLIM MINORITY RULE, see Webb v. McGowen)
i. Promisor received a material benefit from the Promisee
ii. Material benefit received under circumstances bringing a moral obligation
iii. Subsequent promise to compensate
iv. The nature of the circumstances was such that the promisee had a reasonable
expectation of compensation
1. Example: employer-employee, where there may be an “expectation” of
compensation.
e. Enforceable w/o consideration
f. Can be limited to part of the debt
g. Some jurisdictions require the subsequent promise to be in writing.
h. If the promise is considered as only a gift, the promisor has not been unjustly enriched.
_____________________________________________________________________________________

CONTRACT REMEDIES (See Pink Handout)

1. DAMAGES: financial compensation allowed by law for breach of contracts is known as
damages.
a. General (Primary) Damages—damages that may fairly and reasonably be considered as
arising according to the usual course of tings from the breach of the contract itself. These
include…
i. Primary lost profits or primary expectancy (i.e. those profits lost or gained
prevented from the breach of the contract in question;
ii. Out-of-pocket expenses that are required by the contract to complete
performance; and
iii. The value of any benefits given to the other party as required or contemplated
under the terms of the contract.
b. Special (Secondary) Damages—damages that may be reasonably be supposed to have
been in the contemplation of the parties at the time they made the contract as the probable
result of the breach of it.
i. Consequential Damages: UCC §2-751(2) defines as
1. Any loss resulting from general or particular requirements and needs of
which the seller at the time of contracting had reason to know and which
could not reasonably be prevented by cover or otherwise,
2. And injury to person or property proximately resulting from any breach
of warranty.
3. These are secondary damages b/c they do not arise directly out of breach,
but result “indirectly.”
a. Example: Pain and suffering from second surgery to fix the first
surgery.
4. Secondary loss of profits on resale of goods to third party, like selling
gasoline in AM/PM Case (NOT a primary expectation damage)

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5. Loss Due to Emotional Disturbance Rest.2d §353: recovery excluded

unless breach causes bodily injury, or contract/breach is of such a kind
that serious emotional disturbance was a particularly likely result.
6. Attorney’s Fees: American rule, no, unless by statute or contract b/t
parties.
ii. Incidental Damages: UCC §2-715 defines as
1. Expenses reasonably incurred in inspection, receipt, transportation and
care and custody of goods rightfully rejected, any commercially
reasonable delay or other breach.
a. Example: Freezing of ice cream under a contract for delivery of
ice cream that was breached. Costs incurred “indirectly” in
continued freezing to prevent greater damages.
iii. DISTINGUISH THE TWO: incidental damages typically the costs incurred
through transporting, storing, or reselling goods. Consequential damages stem
from losses incurred by non-breaching party.
c. Nominal Damages—generally awarded for breach, but P has either failed to prove
damages or the damages are too speculative and cannot be presumed. Essentially, court
finds breach, but may only award $1.
d. Punitive (Exemplary) Damages—designed to punish/deter the breacher, and they are
only allowed in a few, very limited circumstances. Typically, but not always, awarded
when there is malicious or willful and wanton conduct by the breacher that also amounts
to an independent tort.
i. Rest.2d §355: punitive damages are not recoverable for breach of contract unless
the conduct constituting the breach is also a tort for which punitive damages are
recoverable.
ii. Hibschman Case: Punitive damages awarded whenever elements of fraud,
malice, gross negligence, or oppression mingle in the controversy.
1. Not excessive unless at “first blush” they are.
e. Liquidated Damages—damages by agreement of the parties in the contract.
i. Rest.2d §356(1): damages for breach by either party may be liquidated in the
agreement but only at an amount that is reasonable in light of the anticipated or
actual loss caused by the breach and the difficulties of proof of loss
(unreasonably large liquidated damages are unenforceable on ground of public
policy)
1. Penalty Clause: loss agreed damages seen as penalty; revert back to
common law damages (issue: paternalism v. fair compensation). When
there is more than the actual damages, doesn’t vary on the (1) severity of
the breach, or (2) the timing of the breach.
ii. Thus, Pre-Reqs: (1) difficulty in determining damages, (2) reasonable estimate at
the time of K (must VARY according to Severity/Time)
1. EXCEPTION: Construction contracts may have Penalty Clause.
a. Most courts require showing actual harm to employ penalty
clause.
2. TYPES OF INTERESTS: (to fairly compensate)
a. Expectation Interest—also called “performance interest” is designed to put the non-
breaching party in the position he or show would have been in had the contract been
performed as promised. Non-breaching party may also be able to recover part of his
reliance and restitution in the form of damages.
i. Primary Expectancy UCC §2-714(2) (general damages): difference in the value
of the goods accepted and the value the goods would have had if they had been
as warranted.

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ii. Non-Recoverable Reliance: expenses that are necessary to obtain expectancy

(such as survey fee and loan application fee)
iii. Non-Recoverable Restitution: restitution that is a result of full, but defective,
performance (like surgeon’s fee; would have to pay anyway if K was performed).
b. Reliance Interest—designed to put the non-breaching party in the position he would
have been in before the contract was entered into (in most case, reliance interest includes
restitution interest). Party may recover expense of preparation and part performance, as
well as other foreseeable expenses incurred in reliance upon the contract (ALL reliance,
ALL restitution)
i. Most courts do not allow the recovery of damaged expended before the contract
was entered into.
c. Restitution Interest—designed to compensate for the benefit that was conferred on the
other party (ALL restitution)
i. Part performance on breacher’s property allows for restitution.
3. LIMITATIONS: often at issue for secondary damages
a. Certainty—in order to recover any damages, P must show:
i. That the breach caused the injury, AND
ii. The amount (i.e. dollar amount) of the suffering from the breach
iii. Market forecasts, expert witness testimony and analysis
b. Foreseeability—damages may be award for injury caused as a result of the breach (i.e.
incidental/consequential/secondary damages) however the likelihood of such injuries
must have been foreseeable to the parties before the time of the breach (consequences of
breach foreseeable, not the breach itself)
i. Hadley Rule: (1) damages that may so naturally and obviously flow from the
breach that both parties are deemed to contemplate them (i.e. general damages),
OR (2) damages deemed to be contemplated if the promisor knows or has reason
to know of the special circumstances that will give right to such damages—
“special/consequential” damages (like the option K in Hypo A).
c. Avoidability (Mitigation)—parties have a responsibility to mitigate their damages…
1. If it is less damaging to stop, then stop
2. If it is less damaging to continue, then continue
i. Failure to mitigate is something that should be considered as counsel for a client
who failed to do so, but brought up by the opposing counsel
ii. Part performance, in control of breacher, up to breach and stop order, but not
after the breach and stop order (be/c contractor failed to mitigate).
iii. UCC §2-704 Part Performance: either stop now and resell or complete
manufacture and resell, pick one that will avoid the most damages
iv. UCC §2-709 Action for Price: full performance, damages able to get “profits-
salvage value = damages”
v. Employment: Salary agreed on – salary earned (or with reasonable effort might
have earned with other comparable employment.
1. But what is comparable?
2. If P was fired and then re-offered the same job, P not required tot take
the job back.
3. Mitigating Damages—finding substitute for employment? Reduced.
vi. Cover (See UCC Remedies below)
1. Buyers must try to find the item elsewhere
2. Sellers must try to find another buyer
4. DAMAGES UNDER THE UCC
a. Buyer’s Damages: If buyer does not make a good faith attempt to cover, no
consequential damages (including no secondary lost profits) that could have been

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prevented by cover. Not limited to merchants; applies to all transaction for the sale of
goods. Cover—Defined as a “good faith substitute”
i. Non-Accepted/Rejected Goods
1. §2-712: If Cover
a. Cover Price – Contract Price = Recovery (+ §2-715)
2. §2-713: If NO Cover
a. Market Price (at the time of breach) – Contract Price = Recovery
3. PLUS §2-715
a. Incidental and consequential damages. HOWEVER, Buyer’s
failure to attempt to cover in good faith may bar collection of
these damages (unable to cover despite effort allows for §2-713)
ii. Accepted Goods
1. §2-714
a. Value of Goods Promised – Value of Goods Received
2. PLUS §2-715
a. Incidental and consequential damages. HOWEVER, Buyer’s
failure to attempt to cover in good faith may bar collection of
these damages
b. Seller’s Remedies
i. §2-706
1. Contract Price – Lower Resale Price = Recovery
ii. §2-708
1. Contract Price – Lower Market Price (at the time of breach) = Recovery
5. RESTITUTION
a. Implied-In-Law/Quasi-Contract—arises in situations where on party has the benefit of
money, property, or services of another, and it would be unjust to allow that party to keep
the benefit without paying for it. Where this unjust enrichment occurs, the law presumes
a promise of restitution.
i. Quantum Meruit: the value of service rendered to another
ii. Quantum Valebant: the value of property delivered to another
iii. Money Had and Received: money held by one person but belonging to another
b. Restitution for Breach of Contract—see Restitution Interest above in Section 2(c).
i. Rest.2d §371: Measure of a Restitution Interest
1. If a sum of money is awarded to protect a party’s restitution interest, it
may as justice requires be measured by either…
a. The reasonable value to the other party of what he received in
terms of what it would have cost him to obtain it from a person
in the claimant’s position, OR
b. The extent to which the other party’s property has been increased
in value or his other interest advanced.
ii. Compare reliance interest with restitution interest and pick the one that is bigger
c. The Breaching Plaintiff—the breacher can get restitution, value of services received.
d. Does Not Fit Within Statute of Frauds—see below
6. EQUITABLE REMEDIES
a. Specific Performance—where remedy at law is inadequate (i.e. damages), typically see
in cases over the sale of land
i. Majority Rule—For buyer and seller
ii. Minority Rule—Only for the buyer to seek specific performance
iii. Usually not appropriate for goods
1. Exceptions
a. Goods are unique AND the remedy at law would be inadequate

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b. Provide benefit to the public OR the public would be harmed if

specific performance not granted.
b. Writ of Mandamus—court order to order public official do something/his job
c. Injunction—order to stop doing something
i. Injunctive relief can be used to enforce a promise not to render personal services
_____________________________________________________________________________________

STATUTE OF FRAUDS:
1. Questions to Ask
a. Does contract fall within Statute of Frauds?
i. No—oral contract is enforceable
ii. Yes—go to question 2
b. Is the writing requirement satisfied?
i. Yes—contract is enforceable
ii. No—go to question 3
c. Is there an exception to the Statute of Frauds that applies?
i. Yes—contract is enforceable
ii. No—contact is NOT enforceable
2. Must be in “Writing”: requires that certain types of contracts be evidenced and memorialized in
writing (reduction to tangible form), or at least evidenced by a signed, written
instrument/memorandum of essential terms. [Except for UCC Requirements, see below]
a. Must Contain (Common Law)
i. Signature of the “party to be charge” (usually D, the party being sued)
1. May be handwritten, typed, or printed, and if so intended, a party’s
initials will suffice
ii. Indication that the contract has been made
iii. Identification of the parties to the contract
iv. A reasonable description of the subject matter of the contract
v. All essential terms of the contract
1. The terms and conditions of the agreement; AND
2. In many states, a recital of the consideration
3. EXCEPT as to goods, only quantity is required
b. Must Contain (UCC)
i. Quantity
ii. An indication the contract has been made
iii. Signed by the party to be charged
3. Types of Contracts that Must Be Memorialized in Writing
a. Executor/Administrator Contracts—contract by an executor or administrator to answer
for the debts of a decedent and payable out of the executor/administrator’s own personal
assets must generally be in writing.
i. Ex. D dies leaving $500 debt to C. A (the administrator of D’s estate) promises
C that he will pay D’s debt out of his own pocket  must be in writing.
b. Suretyship Contracts (Promise to Pay the Debt of Another)—promises made to
another person’s creditor to “answer for” (be responsible for) that person’s debt must be
in writing. However, if an oral suretyship promise is made to the debtor, it is
enforceable. [Contract between surety and creditor]
i. Requirements
1. There must be a debt
2. Promise must be to pay the debt of another, not an original promise
a. The Statute applies only to promise to be secondarily liable for a
third party’s obligation

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i. Ex. “I will pay for the good X is buying from you if X

doesn’t pay for it”
ii. Non-Ex. “Send good A to X and bill it to me”
3. Promise must be made to the creditor (or the creditor is aware of it)
4. Main Purpose Rule
a. What is the main purpose of the promise?
b. If it was to benefit the promisor, then the section does not
activate (i.e. it is NOT required to be in writing)
i. Ex. Remote highway construction crew in Alaska.
Vendor drives a mobile kitchen out to serve them. They
get paid once a month. He agrees to run each of them a
tab. Company owner says, “If my men don’t pay you, I
will.” Owner made the promise to keep his men on the
job. The benefit was to him, the promise need not be in
writing
c. Contracts for the Sale of Land—sale of an interest in land must be in writing
i. Part Performance Doctrine: a seller who conveys interest in land to the
purchaser can recover the contract price from the purchaser even if the contract is
oral. Certain kinds of part performance by the purchaser of an interest in land
may take the contract out of the Statute where equitable relief (i.e., specific
performance) is sought.
1. Reliance Doctrine: part performance that does not meet the traditional
test, but that constitutes reliance, may estop the other party from pleading
the Statute of Frauds.
ii. Land: Minerals still in the ground, or minerals to be extracted by the Buyer
1. Also, buy/sell land; assumption, extensions, modifications or RE
mortgages; create, transfer, or assign a long-term lease (over 3 years,
typically, by statute).
iii. Goods: Growing crops (includes timber), minerals to be extracted by the Seller
d. Contracts in Consideration of Marriage—marriage settlement contracts must be in
writing
i. Does NOT apply to mutual promises to marry
ii. Apples to promises where there is a promise to marry attached to a condition
1. Ex. A promises to support B’s child if B would marry A
2. Ex. A promises to leave his whole estate to B if B marries A
3. Prenuptial Agreements
e. Contracts that Cannot Be Performed Within One Year of Making
i. If the contract cannot possibly be completed within 1 year, it must satisfy the
writing requirement.
ii. Counting Rule: discard partial first day of contract, and start the next day
1. Ex. “10/1/08 through 10/1/09”—discard 10/1/08, start counting from
10/2/08, thus the contract is for 1 year.
2. Count from agreement on contract
3. Some courts start counting when performance actually begins, and that
the later starting date is only restating obligation to work.
iii. Does not turn on the actual course of subsequent events
1. “I’ll employ you for life”—judge only if it is possible to have the
contract last for less than a year  no writing required…even if the party
worked for more than a year
iv. Nor on the expectations of the parties as to the provision

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1. Does not turn on possibilities. Turns on whether it is possible for

contract to be performed in less than a year
v. Contracts of uncertain duration are excluded
vi. One cannot point to the fact that one will die within a year not to require writing
1. UNLESS, contract contemplates death as a termination of contract.
vii. If contract provides that either party may terminate the contract at any time
1. Majority—need not be in writing
viii. Performance Possible but Unlikely: if the contract is capable of being performed
within the year, it is not within the Statute of Frauds and is enforceable even if it
is oral.
ix. Exception for Performance: if a contract is impossible to perform within one
year but is fully executed on one side, most courts hold that the contract is taken
out of the Statute and is enforceable even if it is oral.
f. Contracts for the Sale of Goods—UCC §2-201, contracts for the sale of goods at $500
or more must be in writing.
i. Paragraph 1
1. WHEN do you need the writing?
a. Sale of goods, AND
b. Price is $500 or more
2. What must be IN the writing?
a. Quantity
b. Indication that a contract has been made/offered
c. Signature of the “party to be charged”
ii. Paragraph 2
1. If between merchants
2. If one party receives a writing signed by the other party, which would
bind the other party under the Statute of Frauds, they have 10 days to
object, or they will be deemed to have signed it
iii. Paragraph 3 (Exceptions)
1. Writing is NOT necessary if:
a. Part Payment or Part Performance Received
i. Limited to the part paid or part performed. When the
quantity is 1, down payment is enough (check w/o
quantity, courts presume at least 1)
1. Ex. Oral contract for the sale of a car can be
enforced if there is part payment
2. Ex. Oral contract for several $500 items. $50
part paid. Part payment takes contract out of the
statute of frauds as to one item.
ii. If check said “Part payment for 10 items,” then it would
take the contract out of the statute of frauds as to ten
items.
b. Parties admit in pleading, testimony, etc. that contract exists
c. Specially manufactured goods not suitable for resale
i. If the item is very unique, the contract will be assumed
iv. §1-206 Promise for the sale of personal property, other than goods, more than
$5,000 [WILL NOT BE ON THE EXAM]
1. Ex. Copyrights, Intellectual Property, etc.
2. Does not apply to goods, securities, or security agreements

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4. Modification of Oral Contracts

a. Modification of a contract outside the Statute of Frauds, which brings it within the Statute
of Frauds must be in writing
b. If the modification itself is not within the Statute of Frauds it need not be in writing
i. Some courts say that if at any time the contract fell within Statute, it must be in
writing.
c. Imply good faith obligation in dealing (no additional consideration)
5. EXCEPTIONS
a. Part Performance
i. Only as to goods
b. Admissions
i. The Statute of Frauds cannot be used as a defense if there has been a court-
related admission of a valid contract
1. In Depositions, Answers to Questions
c. Confirmations UCC §2-201(2)
i. Between merchants
ii. Within reasonable time written confirmation
iii. Sufficient against Sender
iv. Received/has reason to know of contents
v. Satisfies Statute of Frauds unless objection within 10 days is received
d. Waiver (Affirmative Defense)
i. Promise not to pursue a Statute of Frauds defense. If you want to preserve the
defense, you must raise it in the pleadings (Complaint and Answer to Complaint),
or it is waived
e. Equitable Estoppel
i. Prevent a person from asserting the defense of the Statute of Frauds if there is
misrepresentation on which the other party detrimentally relies.
ii. One party has misled the other by words or conduct
iii. Should not be allowed to benefit from their misconduct
1. Ex. Lawyer says no writing is required, where it actually is. Should not
be allowed a Statute of Frauds defense
a. But what if person was not lawyer, courts weigh the following?
i. Look to expertise
ii.
iii. Generally, ignorance of the law is not an excuse
2. Ex. One party told the other he had signed, even though he never
actually signed the paper. Reliance on the statement should be allowed.
6. Remedies
a. NEVER Expectation Damages
b. Rarely Reliance Damages, Monarco v. LoGreco 220 P.2d 737 (1950)
i. Parent and Step-Parent with one child. Lived in California. Son was 18-20, and
wanted to go into the city for work. Parents told him that if he stayed and
worked the farm, they would leave it to him. Married a city girl, wanted to go to
the city with her. Parents told him to bring her to the farm, and they would pay
him room and board, etc. He agreed. Parent dies, leaving step-parent and child.
Step-parent leaves farm to someone else. Court found reliance damages
appropriate to rectify the wrong.
ii. All jurisdictions that allow reliance damages will cite Monarco
c. Always Restitution Damages
i. Value of the benefit conferred (value of the services rendered)

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“BATTLE OF THE FORMS”

UCC §2-207 (1)
Did the return document change a “dickered” term?
(Price, quantity, something the parties clearly negotiated over)
| \
NO YES, go to §2-207 (3), Counteroffer
|
Does it trigger the “proviso” language?
(Language that indicates that the contract is “expressly conditional
on assent to” upon the new condition, “subject to” is not proviso)
/ \
NO, Go to §2-207 (2), Acceptance YES
|
Was there assent to the proviso language?
/ \
YES NO
/ |
A contract exists according to Go to §2-207 (3), Counteroffer
the additional or different term
(Won’t be litigated though)
_____________________________________________________________________________________

UCC §2-207 (2): ACCEPTANCE

Were the exchanged documents between MERCHANTS?
/ \
NO YES
| |
A contract exists. The additional or The additional/different term will automatically
different term is merely a proposal become part of the contract
for an addition to the contract unless |
the Offeror expressly agrees UNLESS, any of the following 3 is present:
(1) Term “materially alters” (arbitration,
warranties, “very important” term)
(2) Objection within reasonable time, or
(3) The offer is limited to its terms (“no other
terms considered”)
|
A contract exists. The additional or different
term will not be part of the contract
_____________________________________________________________________________________

UCC §2-207 (3): COUNTEROFFER

Does the CONDUCT of the parties indicate there is a contract?
/ \
NO, no contract YES, contract exists. Terms include all the
terms on which the parties agree, PLUS any
UCC gap-fillers [place (seller’s place of
business) time (reasonable time) open price term
(reasonable price)]

NEVER ADDRESS BOTH ACCEPTANCE AND COUNTEROFFER ON THE EXAM

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CONTRACTS II OUTLINE
Professor Mara Kent, Hilary Term 2010

THE PAROL EVIDENCE RULE AND INTERPRETATION OF THE CONTRACT

THE PAROL EVIDENCE RULE (PER): “Under the parol evidence rule, extrinsic or parol (informal/oral
or written) evidence concerning a prior or contemporaneous agreement is not admissible to vary or
contradict a fully integrated writing” (see Eichengreen v. Rollins, Inc.), i.e., the PER generally precludes
evidence of understandings, not reflected in a writing, reached before or at the time of its execution which
would vary or modify its terms [PER is a rule of EXCLUSION]
1. Extrinsic Evidence: terms agreed upon prior to or contemporaneous (at the same time) as the
integrated (oral/written) terms [it’s the outside evidence you’re trying to add into the writing to be
the whole contract].
2. Threshold Question for Application of PER: is the writing integrated? [An integrated writing
cannot be contradicted by contemporaneous statements]
a. Integration—writing intended by the parties to be a final and complete expression of the
entire agreement.
i. Total Integration
1. The writing is final, AND
2. Is the complete written expression of the parties’ agreement
a. Consequence of Total Integration
i. Cannot contradict the writing with extrinsic evidence
ii. Cannot supplement by consistent/additional terms
ii. Partial Integration
1. The writing is final, BUT
2. Its NOT the complete written expression of the parties
a. Consequence of Partial Integration
i. Cannot contradict the writing, BUT
ii. May supplement by extrinsic evidence with consistent,
additional terms.
iii. Unintegrated Writing
1. NOT the final written statement of the parties
a. Consequence of Unintegrated Writing
i. PER does not apply at all.
b. Two Tests (of Six) to Determine Type of Integration (used by Judges, not Jury):
i. Williston’s View (Majority)—Non-Goods: Not looking for actual intent of the
parties, the intent is “presumed” using reasonable person standard.
1. If merger/integration clause DOES exist, presume Total Integration
a. Unless merger/integration clause obtained by fraud, mistake, etc
(other avoidance doctrines).
2. If merger/integration clause DOES NOT exist
a. TEST: Would it have been “natural” for the parties to include
the term in the writing?
i. If Yes – Total Integration
ii. If No – Partial Integration
b. Ask this question for each proffered (formally offered)
additional, consistent term.
3. Examples of Merger Clauses:
a. “This writing contains all the terms of the agreement of the
parties”
b. This contract is the complete understanding of the parties”

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ii. UCC §2-202—Goods

1. Assumes writing is a PARTIAL integration (i.e. one cannot contradict
the writing BUT can explain and supplement it by consistent, additional
terms w/course/dealing or usage of trade or by course of performance),
a. What contradicts?
i. Hunt, negate a term of the writing (narrow)
ii. Snyder, absence of reasonable harmony in the terms of
the language and respective obligations of parties
(broad)
2. UNLESS the Judge finds the writing to be the complete and exclusive
statement of the parties’ terms, then it’s a TOTAL integration.
a. Test (Comment 3)
i. Would the parties “certainly” have included the term?
1. If Yes – Total Integration
3. EXCEPTIONS—PER Does NOT Exclude (i.e. evidence is admissible) “ISICA”ADDRESS ALL
a. Evidence on whether the writing is integrated
b. Statement/agreements subsequent to the writing
c. Evidence to interpret (ambiguity in) a writing (see ‘Interpretation’ below)
d. Evidence to show that a (particular) condition to formation of contract exists
i. Pym v. Campbell (1856)—condition to formation is fact/event that if occurs, a
contract will exist but if doesn’t occur, no contract will be formed.
ii. Condition: Fact or an event that either activates or discharges a duty
1. Condition precedent—activates duty
a. Ex. If it rains tomorrow, I will pay you $500
2. Condition subsequent—discharges duty
a. Ex. I’ll pay you $500, but if it rains tomorrow, I won’t.
iii. Formation—if fact/event happens, contract will or will not form.
e. Evidence to show matters of avoidance exist
i. Fraud, duress, mistake, illegality, etc.
4. When Approaching a PER Problem, ASK:
a. Is the contract in writing?
b. Do any of the exceptions apply?
i. If any of the 5 applies, stop the analysis.
c. Is writing integrated (final expression of the parties’ agreement)?
i. I.e. not a negotiation or draft
d. Is the integrated/final writing TOTALLY or PARTIALLY integrated? Judge determines
using 6 tests.
i. Total – every term of the contract is in the writing, can’t contradict or supplement
the contract
ii. Partial – every term of the contract NOT in the writing, can’t contradict, CAN
supplement.
LOOK at CALI Lessons for PER on TWEN (password in library)

INTERPRETATION: Approaches to determine if evidence will be let in to interpret terms already in the
contract. If interpretation of an integrated writing requires the introduction of outside/extrinsic
evidence…
1. The Two-Step Approach (Non-Goods) [Most Popular View]
a. Proffer evidence to the Judge to demonstrate that the writing (or a term) is ambiguous;
b. If the Judge agrees that there’s an ambiguity, introduce evidence into the record to
explain the ambiguity.
i. See Pacific Gas & Electric Co. v. G.W. Thomas Drayage & Rigging Co. (1968)

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2. UCC §2-202 (Goods)

a. Terms in an integrated writing (dealing w/Goods) MAY BE explained or supplemented
(but NOT contradicted) by inter alia, course of dealing, course of performance, trade
usage.
3. Additional Rules of Interpretation: If interpretation of an integrated writing DOES NOT
REQUIRE the introduction of outside evidence:
a. Take into account the circumstances surrounding the making of the contract.
b. Take into account the principal purpose of the contract.
c. View the contract as a whole.
d. A reasonable, lawful, or effective interpretation is preferred to a literal, illegal, or unusual
interpretation.
e. Favor the public interest.
f. Utterances are to be interpreted most strongly against the party responsible for them.
i. Construe against drafter b/c if you created the problem it won’t be construed in
your favor.
g. Look at the subsequent conduct of the parties to assist in interpretation.
h. An earlier tentative agreement will be rejected in favor of a later final expression.
i. Absent a contrary intent:
i. Ordinary/popular words are to be given their normal meaning.
ii. Technical words or ‘terms of art’ are to be given their special meaning.
iii. Established legal words are to be given their precise meaning.
iv. Words of trade, locality, or profession are to be given their particular meaning.
j. Absent contrary intent, inconsistencies in terms are to be resolved by:
i. Specific terms qualify general terms.
ii. A word/phrase is to be interpreted in the same way throughout the contract.
iii. Correct obvious mistakes of grammar & punctuation.
iv. Spelled out #s take precedence over Arabic #s. i.e. “twenty-two (20)” is
interpreted as “22” not “20.”
[For EXAM PURPOSES, you must know all 10 additional rules in the event that one applies to the facts,
but do NOT need to recite ALL 10 on the exam if they do not apply]
_____________________________________________________________________________________

CONDITIONS
DEFINITIONS
1. Condition—a fact or event that is not certain to occur, which either activates or discharges a duty
a. Linked to a party’s duty
b. If condition is NOT fulfilled, the other party no longer has a duty to perform (forfeiture)
i. There will be a forfeiture, so you cannot enforce the contract
1. Forfeiture means loosing the agreed upon exchange
ii. Note: Courts do not like forfeitures
c. Key Words: “When”, “While”, “If”, “As soon as”
2. Promise (Covenant)—a contractual undertaking, the breach of which will give rise to liability in
damages or equitable relief
a. If promise is breached, the breacher can be sued for damages or equitable relief
i. Contract is still enforceable (i.e. not forfeited)
b. Key Words: “Shall”, “Will”, “Promise”
3. Promissory Condition—a promise that a fact or event will occur. The condition component
means that no duty arises unless that fact or event occurs (Ex. Problem 141, 142, 162(c))
a. If promissory condition is NOT fulfilled
i. Can sue for damages, AND
ii. Other party’s duty doesn’t rise (excuses the other party’s performance).

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TIMING OF CONDITIONS
1. Condition Precedent—fact or event which activates a duty
a. Ex. “If it rains tomorrow, I’ll pay you $500.”
i. ‘Rain Tomorrow’ is the fact/event.
ii. ‘Pay you $500’ is the duty that will be activated if the fact/event occurs
b. Event must occur before performance is due
c. Plaintiff has the burden to prove that the fact/event occurred
2. Condition Subsequent—fact or event which discharges a duty
a. Ex. “I’ll pay you $500, but if it rains tomorrow, I won’t”
i. ‘Rain Tomorrow’ is the fact/event
ii. ‘Pay you $500’ is the duty that will be discharged if the fact/event occurs
b. The performance obligation id due but will cease to exist upon the occurrence of the
specified event
c. Defendant has the burden to prove the fact/event occurred/didn’t occur.
3. Concurrent Condition—where the parties have entered into a bilateral contract and haven’t said
who is to go/perform first
a. Often when transaction involves both a good and money.
b. It’s possible for the parties to perform at the same time
c. If the condition is not precedent or subsequent then you assume performance can happen
at the same time
i. Remember: bilateral contract  acceptance by promise (promise for promise)

TYPES OF CONDITIONS
1. Express Condition—if the parties have expressed intent in the contract that performance is
dependent upon the occurrence or nonoccurrence of an event not certain to occur (satisfied by
complete performance).
a. Words Often Triggering Condition: (IPOW SWAA)
i. “If” “So that”
ii. “Provided that” “While”
iii. “On condition” “As soon as”
iv. “When” “After”
b. Look at the intent of the parties and a reasonable construction of the language in the
contract, in light of the surrounding circumstances (see Jones Associates v. Eastside)
i. Language “linked” to a duty
c. Howard Guidelines/Factors: is it a promise or a condition? Use the following;
i. Generally, legal policy opposed to forfeitures (arising from conditions)
ii. Ambiguity is construed against the drafter
iii. When it is doubtful whether words create promise or a condition precedent, they
will be construed as creating a promise.
iv. The provisions of a contract will not be construed as conditions precedent in the
absence of language plainly requiring such construction (IPOW SWAA above).
v. “Expressio Unius Est Exclusio Alterius”—expression of one thing is the
exclusion of another
d. Satisfaction Clauses (Conditions of Satisfaction) (see Chodos v. West Publishing)
i. If the subject matter of the contract is commercial, then use objective standard
(if impractical to use objective, then you can use subjective standard)
1. Objective Standard—would a reasonable person be satisfied
ii. If the subject matter of the contract is personal, then use subjective standard
1. Subjective Standard—were they in good faith not satisfied by the work

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e. Construction Contract Clauses

i. “Pay when paid”—one party doesn’t have to pay another party unless the first
party is paid
1. Promise related to timing
2. If promise is breached, the breacher can be sued for damages or equitable
relief.
a. Ex. GC won’t have duty to pay SUB until owner pays GC
ii. “Pay if paid”—one party doesn’t have to pay another party unless the first party
is paid.
1. There is a duty to pay (thus condition)
2. If condition is NOT fulfilled, the other party no longer has a duty to
perform (i.e. forfeiture).
3. Only remedy is forfeiture.
iii. “GC not to pay SUB until GC gets paid” (see Gulf Construction Co. v. Self)
1. Condition or Promise? Promise
a. If you want it to be a condition, you must expressly state it in the
contract
2. Remedy—SUB allowed to recover under quantum meruit
f. Progress Payments
i. Payment must be made before the next segment of work is done
ii. Usually phrased as an express condition
2. Implied-in-Fact Condition—duty to act in good faith; infer the parties’ intent concerning the
order of performances form their conduct, the surrounding circumstances, and the sense of the
contract (see Bright v. Ganas).
a. If party does NOT act in good faith, the duty of the other party is discharged.
3. Constructive Condition (Implied-in-Law Condition)—condition imposed on the parties by the
courts (where the intent is unclear, the court may use a constructive condition to fill in the blanks
concerning the timing of performances); make one parties performance dependent on the other
party [TWO PROMISES]
a. Will only come into play if you have an exchange of promises.
i. Conditions of Exchange  “Who goes first?”
1. Need to identify whether independent or dependent promises
a. Its assumed that defendant would not give over his life’s
business if the plaintiff didn’t pay for it (see Kingston v. Preston)
ii. Was the condition satisfied?
1. Need to decide whether or not there was a substantial performance of the
condition
a. For non-goods/common law, use substantial performance (see
below)
b. For goods/UCC, use perfect tender rule (see below)
b. Kingston Three Types of Promises
i. Independent—either party may recover from the other for an injury he received
due to the breach  NOT subject to a condition
ii. Dependent—performance of one party depends on prior performance of another,
so until this prior condition is performed, the other party is not liable to an action
on his agreement  subject to a condition (constructive)
1. Shaw v. Mobil Oil Corp., Mobil needed to deliver ordered gas before
Shaw pays minimum rent. When Mobil delivered less than ordered,
Shaw doesn’t have to pay, but Mobil may be excused from delivery

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2. Corbin—if one of these promises becomes impossible of performance,

the party who made it may be excused from legal duty. His failure to
perform is not a breach of the contract
a. But the fact that the law excuses him from performance does
NOT justify him in demanding performance by the other party
iii. Mutual Conditions—to be performed at the same time, if one party ready, and
offered, to perform his part and the other neglected or refused to perform his, the
other party may maintain an action against the one in default
c. Doctrine of Substantial Performance—substantial performance will satisfy a
constructive condition, where 100% literal performance is required for an express
condition to be satisfied.
i. Once you have determined that the condition is (or might be) a constructive
condition, the issue becomes “did the breacher substantially perform (or was his
breach material)?”
1. If there is NOT substantial performance of constructive conditions, then
there is a material breach of the contract
a. One either substantially performs or materially breaches
(BUT NEVER BOTH)
ii. DOESN’T apply to GOODS (goods are covered by UCC’s PTR)
iii. How do you determine substantial performance?
1. By weighing the Four Factors set out by Cardozo in Jacob v. Kent
a. The purpose to be served (by the piping)
b. Desire to be gratified (quality of piping)
c. Excuse for deviation of the letter (cheaper/same quality)
d. Cruelty of enforcing adherence
e. Good faith—cannot willfully breach
d. Time is of the Essence Clause
i. General Rule: Do NOT construe construction contracts as time is of the
essence, you must have express language to make it so.
1. i.e. “payment is conditioned on timely completion…”
a. In the absence of specific language, construe them as
constructive conditions that can be satisfied with substantial
performance, activating the other party’s duty to pay.
b. If its not said so expressly in the K, to find a ‘time is of the
essence clause’ look for:
i. Intent of the parties,
ii. Subject matter, and
iii. Circumstances around the K.
2. Penalty Clauses
a. Evidence that time is NOT of the essence.
ii. If there IS a ‘time is of the essence’ clause AND anticipatory repudiation  can
sue right away (follow the general AR rule in next section of outline).

ORDER OF PERFORMANCE (Tender—way of ordering performance) “Who Goes First???”

1. Tender—
a. An unconditional offer to perform coupled with…
b. The demonstrated ability to carry out the offer of performance, AND
c. Produce the subject matter of the tender
i. If one party tenders  triggers other party’s duty
ii. If neither party tenders  neither party’s duty is triggered
2. Rest.2d §234 Order of Performance (for NON-GOODS)

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a. If all or part of the performance to be exchanged under an exchange of promises can be

rendered simultaneously, they are due simultaneously,
b. UNLESS, the language or the circumstances indicate the contrary.
c. If parties CANNOT go at the SAME time  person who has longer period of
performance must go first.
3. Uniform Commercial Code (for GOODS)
a. UCC §2-507(1)—Effect of Tender:
i. Tender of delivery is a condition to the duty to pay for the goods (unless
otherwise agreed)
ii. Means if you tender the goods (i.e. bananas), it triggers the buyer’s duty to accept
the bananas.
b. UCC §2-511 (1) – Tender of Payment by Buyer:
i. Tender of payment is a condition to the duty to deliver the goods (unless
otherwise agreed)
ii. Means if I ‘show you the money’, then you have a duty to give me the bananas.
c. §2-507(1) & §2-511(1) seem like opposites, but read only one as it applies, were goods
delivered 1st OR $ handed over 1st?
i. Tender of delivery 1 st  507
ii. Tender of payment 1st  511
d. UCC §2-309 (1) – Absence of Time Provision:
i. If neither party is at the place of exchange this may extend the reasonable time
allotted for the exchange, unless someone calls and abandons.
ii. Means…
1. Reasonable time for delivery of goods if not in the contract
2. if one party wants to cancel, he can at reasonable time so long as
notification
e. UCC §2-307 – Delivery in Single Lot or Several Lots:
i. All goods must be delivered in a single lot and the buyer can say no to an
incomplete delivery. EXCEPT:
1. Unless otherwise agreed upon
2. Buyer can’t store a whole delivery
3. It’s not feasible to deliver all at once
f. UCC Gap Fillers Can Also Be Used:
i. Usage of trade (meaning the custom w/in any given industry) – are bananas
usually delivered all at once?
ii. Course of dealing (meaning the parties’ conduct in past Ks w/one another) – does
the seller usually deliver all the bananas at once?
g. Where it’s not clear who has to perform first – tender is the concurrent condition imposed
on each party.
i. Until one party tenders, neither is in breach and cannot be sued.

PERFECT TENDER RULE (PTR) – UCC

1. Perfect Tender Rule—a harsh rule requiring delivery to be 100% perfect performance in the
absence of an express condition requiring 100% performance.
a. i.e. 100 yellow bananas = 100% perfect performance.
b. Under the UCC there’s NO substantial performance, UCC uses PTR
c. PTR requires goods conform to the K in every respect, with only 3 exceptions.
i. If these 3 exceptions apply, PTR gives you additional rights:
1. Right to cure (not an absolute right to cure),
2. Installment Ks (PTR doesn’t apply to installment Ks),
3. Unless otherwise agreed.

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2. Provisions Falling Within the UCC’s PTR Umbrella:

a. UCC §2-601 – PTR
i. The goods must conform exactly to the terms of the K
ii. If the goods fail in any way, you can…
1. Accept the entire shipment, OR
2. Reject the entire shipmen, OR
3. Accept any commercial unit(s) and reject the rest.
iii. Majority View (see Printing Center Case)– if goods don’t conform in any
respect, you have the right to reject, regardless of the motive (doesn’t have to be
in good faith).
iv. Minority View—you can reject only in good faith situation  on EXAM talk
about both!
3. EXCEPTIONS To PTR:
a. UCC §2-508 – Right to Cure
i. Cure = fix the problem  make non-conforming goods conform to the contract’s
requirements. [Applies to rejection, silent to revocation, some courts still apply]
ii. Seller (S) can cure under ONLY 2 circumstances:
1. If time for performance has NOT already passed.
a. Ex. Contract to pick-up car on Feb 1st, then discover on Feb 1st
the spare tire is missing…NO CURE
b. Ex. Contract to pick-up car on Feb 1st, then discover in Jan that
cannot have spare tire…CAN CURE because the time for
performance has not already passed (must get spare tire by Feb
1st, must be cured within the time period)
2. If in the past, Buyer (B) accepted non-conforming goods, and then S
believed this one would be acceptable, S has a longer reasonable time to
CURE, even if the time for original performance has passed.
b. UCC §2-612 – Installment Ks; Breach
i. Installment Contract is when S delivers and B accepts in separate lots.
ii. TWO Rules:
1. May reject an installment  if the non-conformity substantially impairs
the value of that particular installment.
a. Cannot reject the entire K under first rule!!
2. May reject the entire installment contract  if the non-conformity
substantially impairs one or more installments.
c. UCC §2-602 – Manner & Effect of Rightful Rejection
i. Rejection of goods must be within a reasonable time after delivery of tender.
ii. It is ineffective unless the buyer seasonably notifies the seller.
iii. Must hold goods with reasonable care until goods are picked up by seller
d. UCC §2-606 – [what constitutes B’s] Acceptance of Goods (you need to apply the 3
bold factors) (see Capitol Dodge Sales v. Northern Concrete Pipe, Inc.)
i. After a reasonable opportunity to inspect the goods B tells S that the goods are
conforming or that he will retain them in spite of their non-conformity; OR
1. A “reasonable time to inspect” under the UCC must allow an opportunity
to put the product to its intended use, or for testing to verify its capability
to perform as intended.
ii. B has a reasonable opportunity to inspect BUT Fails to make an effective
rejection (2-602); OR
iii. B does any act inconsistent w/the S’s ownership; but if such act is wrongful as
against the S it’s an acceptance ONLY if ratified by S.
iv. Acceptance of part of any commercial unit is acceptance of that entire unit.

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e. UCC §2-608 – Revocation of Acceptance (rejecting good after acceptance)

i. B may revoke his acceptance of a lot or commercial unit whose non-conformity
substantially impairs its value to the buyer if he has accepted it. Substantial
impairment test (2):
1. Subjective Test – did B have a specific need that, in the B’s mind,
wasn’t met by the product.
2. Objective Test – would a reasonable person in the shoes of the B, find
the product inadequate.
ii. Revocation of an acceptance must occur w/in a reasonable time.
1. Not effective until the B notifies the S of it.
iii. A B who so revokes has the same rights and duties w/regard to the goods
involved as if he had rejected them (i.e. hold goods with reasonable care)
f. UCC §2-609 – Right to Adequate Assurances
i. When insecurity arises a party can ask for assurances in writing and suspend
performance until they’re received:
1. Must have reasonable grounds for insecurity.
2. Can’t suspend performance unless commercially reasonable.
3. The assurance you request must be reasonable.
4. Can also apply assurance if you receive a bad installment.
ii. If not given requested assurances w/in 30 days, the party who demanded
assurances may repudiate the whole K.
g. Expressed Warranty Example
i. Printing Case
1. Books printed on gray instead of white paper/ some w/wrinkled pages.
2. Ct. applies UCC PTR even though it’s a service b/c it says parties didn’t
catch this at lower ct.
3. Non-conforming goods so not a perfect tender and B can reject entire
shipment w/in a reasonable amount of time before acceptance.
4. Why reject entire shipment (aside from wrong paper color)?
a. b/c who knows how many of 12,000 books have wrinkled paper,
you’re not expected to go through them all!!
5. Here intentions are good faith b/c they can’t sell wrinkly books!
a. Bad faith would be if B didn’t like the maybe the shade of
orange in pg. 6.
ii. Majority: if goods don’t conform in any respect you have the right to reject,
regardless of the motive (doesn’t have to be in good faith).
1. Minority view is that you can reject only in good faith situation  on
EXAM talk about both!
h. Difference Between Rejection and Revocation Under the PTR
i. Revocation has the harder test b/c you’ve already accepted,
ii. You must show if subj./obj. test for impairment of value are
1. appropriately applicable AND sufficiently met.
i. TARR Rules
i. T = tender, perfect tender required, in that they must be 100% conforming
goods.
ii. A = acceptance, once you accept non-conforming goods you are obligated to
keep them.
iii. R = revocation, you can revoke your acceptance only w/in a reasonable time and
if the non-conformity substantially impairs the value of the good.
iv. R = rejection, you can reject non-conforming goods for any reason before you
accept them.

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EXCUSE DOCTRINES
1. Doctrines that may excuse a fact or event from occurring
a. Is there an excuse for why there was a material breach of a constructive condition OR
why an express condition wasn’t satisfied
b. There are 6 total excuses for conditions
2. Prevention and Cooperation
a. You have a duty to cooperate and may not prevent other party from fulfilling their
obligation
b. IF you get in the way and the other party cannot perform, that other parties’ non-
performance may be excused because of this excuse
c. Sullivan v. Bullock—B was remodeling S’s house, B worker came into house while S
wasn’t there (she said not to do that) and so S wouldn’t let B back in to finish
remodeling.
i. S never made it an express condition. So Court interpreted it as a constructive
condition
ii. Because S didn’t cooperate with B, B couldn’t substantially perform (what’s
required of CC), causing the breach
iii. The material breach is excused because S prevented B from going back in to
finish remodeling.
c. Failure to cooperate can operate as an excuse of why there was material breach
i. Must act in good faith
1. Cannot do anything in bad faith from letting the other party finish their
work
2. While courts impose good faith obligation on employers, employers have
power to fire an employee for good reason, bad reason, or no reason at
all because most employees are employed on an at will status.
3. Extreme or Disproportionate Forfeiture
a. A condition may be excused without other reason if its requirement…
i. Involves extreme forfeiture (Rest.1)/ disproportionate forfeiture (Rest.2), AND
ii. Its existence or occurrence is not an essential (Rest.1)/ not material (Rest.2) part
of the contract.
b. NOTE: extreme forfeiture is NOT enough to excuse a condition, you also must show that
the performance of the condition was not a material part of the agreed exchange (this is
hard to prove)
i. Ex. Burger King v. Family Dining—even though express condition isn’t
satisfied, Family Dining was excused because if they were even 1 day late it
would mean losing 90-year lease. The condition was building in certain time
frame. They were behind and losing such lease is considered extreme forfeiture
AND building behind schedule is not essential because of other factors (i.e. FD
opened 8 other BKs and last 2 were built even if way off schedule)
4. Public Policy
a. When there’s no actual law being violated, plaintiff may seek recovery under violation of
public policy.
b. RATIONALE:
i. Competent parties are free to make contracts
ii. Conditions should be enforced in the absence of a constitutional provision or
state which makes a contract illegal
iii. Courts will excuse a party from fulfilling their duty if the express condition
violates public policy
c. Inman v. Clyde Hall Drilling—employment contract gave less time to bring claim than
the Statute of Limitations. The court held the clause in contract isn’t against public

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policy because employee/plaintiff still had the right to sue under the contract. The court
also says its up to the legislature to decide if such clauses violate public policy.
i. Reasonableness—having 6 months to file claim is reasonable but 1 week
probably is not so in that case such a clause would violate public policy.

5. Waiver and Estoppel

WAIVER
Where a person voluntarily relinquishes a
known right to insist on the fulfillment of a
condition on w/his duty of performance
depends.
Immaterial conditions may be waived.
Material conditions may NOT be waived.
ESTOPPEL
Where a person is precluded form asserting a
known right.
Immaterial conditions may be estopped.
Material conditions may be estopped.

No reliance needed. Needs reliance.

Focuses on the party benefited by the condition.
Most conditions under a K can be waived
including an express condition. ** testable area.
EXCEPT ‘C’ b/c if you waive ‘C’ you’d
change the nature of the K!!
Focuses on the party obligated by the condition.
Normally can’t be reversed b/c the other party
detrimentally relied on it and so if you pull it
back they’ll suffer damages.
[i.e. Moe Case not true estoppel b/c ct. said it
was revocable.]

a. Example of Estoppel—if you do not bring issue in complaint, cannot bring later
b. Example of Waiver—??? BK Case
c. Material Conditions (CANNOT WAIVE BUT CAN BE ESTOPPED)
i. Examples
3. Real Estate Contracts—having a clear and marketable title
4. Insurance Contracts—the occurrence of the casualty
a. Ex. Fire insurance company, cannot waive the occurrence of the
casualty (the fire)
5. Contract for the sale of anything—payment of purchase price
d. Immaterial Conditions
i. Examples
1. Giving notice within a certain amount of time, i.e. 30 days.
2. Payment by or within a particular time.
3. Furnishing an architect’s certificate as a condition precedent to progress
payments
e. Non-Waiver Clause—you may waive your non-waiver clause but in order to reinstate
the contract provisions (if you want to reinstate the non-waiver clause) you must give
notice to the other party
i. Moe v. John Deere Co.—Moe always made late payments. Deere allowed these
for a while (waiving the non-waiver clause) but later repossessed the tractor. The
court held because they’ve accepted late payments in the past, they should’ve
given notice to Moe before repossessing it (reinstating the non-waiver clause)
1. Minority Rule—exceptions to late payments does not waive non-waiver
2. Majority Rule—exceptions to late payments may constitute a waiver of
non-waiver clause (see John Deere Case).
f. Think of it this way: what did you do after what I did, did you rely on my statement?
i. Did the party waive the condition?

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ii. If so, did he retract the waiver by reasonable notification?

iii. Did he retract before the other party relied to his detriment?
6. Election
a. Difference between waiver and election is timing
i. Use the same rules of waiver
b. If the party waives before the fact or event has happened  WAIVER
c. If the party waives after the fact or event occurs  ELECTION
d. Can also look at condition (fact or event) in the form of a continuous timeline
Failure of a condition
“Facts of waiver” occur “Facts of waiver” occur
before condition after condition

= WAIVER = ELECTION
Fact /Event

e. Most courts don’t distinguish between waiver and election

7. Impossibility
a. A condition MAY be excused if there’s an unexpected or unforeseen event that makes
performance impossible.
i. Opera Singer Problem—singer has pneumonia and misses all rehearsals of an
important opera she’s never sung before. She recovers and wants to perform
once show had begun, but manager won’t allow it. Singer had not breached
because of her failure to rehearse because her illness made rehearsal impossible
and thus her condition is excused.
1. If rehearsals are material, then manager is justified in not letting her sing.
b. ASK—is the delay material?
i. Court will look at risk factors involved to determine if it is material
ii. If it’s impossible to perform the condition, that party may be excused from
performing it.

EXCUSE DOCTRINE—ANTICIPATORY REPUDIATION (hereinafter “AR”)—when one party is

ready, willing, and able to perform, but their performance is excused because the other party has
repudiated the contract before the performance date.
1. Definitions
a. “Injured Party” = Non-Breaching Party
b. “Law Day” = Date When Performance is Due
c. Before date of the contract = REPUDIATION  after date of the contract = BREACH
2. Anticipatory Repudiation is Triggered By
a. We have a contract…
b. Obligation is not yet due, AND
c. One party expresses doubts about fulfilling his contract obligation
3. What is a Repudiation?
a. A statement indicating that the obligator will commit a breach that will be a total breach,
OR
b. An affirmative act which renders the obligator unable or apparently unable to perform
without material breach, OR
c. An intent not to perform as and when promised
d. NOT REPUDIATION  evidence that upcoming performance will have minor defects.

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4. Rules of Anticipatory Repudiation

a. A repudiating party can retract/withdraw the AR, as long as the retraction comes to the
injured party’s attention before the injured party materially changes his position in
reliance on the repudiation
b. A non-repudiating party can ignore/waive the AR by putting off their ability to sue
immediately and saying they’ll wait till law day to see if the party will perform.
c. A non-repudiating party has an obligation to mitigate damages if there is an AR.
d. A non-repudiating party can provide the repudiating party time to repent the AR.
e. If all that’s left in an agreement is to pay money, AR DOES NOT APPLY; cannot sue
until you wait to see if payments will be made (see Greguhn)
f. Insolvency is NOT an AR but a perspective inability to perform (hereinafter PIP).
g. A non-repudiating party may demand assurance for an AR and PIP.
5. Remedies for Anticipatory Repudiation
a. Old Rule—had to wait until contract date
b. Hochster—after a promisor has repudiated, the promisee/injured party may…
i. Sue immediately
1. Prob 169: Damages, §2-723 (difference between market price and
contract price based WHEN repudiated) OR §2-713 (market price AT
breach)
ii. Do nothing—wait until time of performance is due and sue (subject to mitigation
principles)
iii. Urge performance (obligator may retract repudiation)
iv. Suspend and demand assurances
1. If obligator ignores demand, it’s a repudiation
2. If the “injured party” tries to push the other party to breach  they (the
injured party) become the breaching party
6. Mitigation = Question of Timing
a. Must take reasonable steps to mitigate, but don’t actually have to go with another
contract that would hurt you.
b. If you wait until law day  duty to mitigate comes on law day.
c. If you give party a grace period  then you have a duty to mitigate once the grace period
is over.

Anticipatory Repudiation Perspective Inability to Perform

1. excuses the condition of being ready,
willing and able to perform (they cannot or
will not perform)
2. injured party has right to sue right away
(don’t have to wait until date of performance
to sue)
1. excuses the condition of being ready, willing
and able to perform (they are not sure if they
can perform)
2. injured party must wait until time of
performance to sue!
 there are ways to convert PIP into AR! UCC
↓

7. Evidence of Prospective Inability to Perform (PIP)

a. Not a repudiation  must wait until the time of performance to sue
b. While not an express repudiation, it IS grounds to demand assurances
c. Reasonable ground for insecurity…
i. Insolvency
ii. Non-payment
iii. Tender of non-conforming installment
iv. Late delivery

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d. Hope—breaching party not able to demand assurances. You cannot be in breach of

the contract and sue (Ex. Windows not delivered because demand prepayment first—
don’t make demand until already in breach).
8. Uncertainty as to AR v. PIP  You Can Demand Adequate Assurances
a. UCC §2-609 (Goods):
i. Need reasonable grounds for insecurity;
1. I.e. other party is insolvent
2. Unreasonable Grounds—you think they will hold you liable for your
breach (see Hope).
ii. If between merchants, the reasonableness determined according to commercial
standards.
iii. Must be in writing;
iv. Response required within 30 days.
v. Once you have reasonable grounds for insecurity and you have required it in
writing, if you fail to get adequate assurances within 30 days then it’s no longer
a PIP but an AR!
1. You can then sue right away OR suspend your performance if reasonable
b. Rest.2d Contracts §251 (Non-Goods):
i. Need reasonable grounds for insecurity;
ii. Does NOT need to be in writing;
iii. Response required within a reasonable time (not just 30 days).
9. Effect of Insolvency as Adequate Assurances (UCC)
a. Where the obligator’s insolvency givers the obligee reasonable grounds to believe that
the obligator will commit a breach, the obligee must suspend any performance for which
he has already received the agreed exchange until he receives assurance in the form of…
i. Performance itself,
ii. An offer of performance, OR
iii. Adequate assurance
b. A person is insolvent whom either has…
i. Ceased to pay his debts in the ordinary course of business OR
ii. Cannot pay his debts as they become due
c. **Can only ask that they give you adequate assurance if you hear they are going
bankrupt. You cannot terminate the contract. Demand assurances, and if you don’t get
it, then you can treat it as a repudiation.
10. FOR EXAM PURPOSES/ESSAY: Determining whether it’s an AR or PIP
a. First ask: Is it a sale of goods?
b. Assuming we have a contract, is this an AR or PIP?
i. If you declare the contract repudiated when the other party expressed a PIP, then
you are in breach
ii. If it can go either way, address BOTH issues in the essay
c. Is the injured party entitled to demand assurances?
i. Don’t demand unreasonable assurances
ii. Unreasonable assurances can make you the breacher
d. Is response to the §2-609 letter adequate?
e. Failure to respond to a §2-609 letter ripens into repudiation after a reasonable time not to
exceed 30 days.
f. Is there a retraction of the repudiation?
i. If retraction is still possible, you want to use. Retraction reinstates the contract,
but doesn’t take away your damages (for delay, you will get damages for that
week or month); you don’t lose the claim for damages.
SEE TWEN FOR QUIZZES ON CONDITIONS AND EXCUSES

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_____________________________________________________________________________________

THIRD PARTY CONTRACTS (Third Party Beneficiaries, Assignments, & Delegations)

1. Steps to Follow in TPB Situations (See Pink Sheet)
a. Step 1: Identify the Players
i. Promisor (Pr) – makes the original promise that will benefit the third party
ii. Promisee (Pe) – person to whom the promise is made
iii. Third Party (TP) – stranger to the original contract, receiving benefit of the
promise
iv. FOR EXAM: actually explain how and why a party is a promisor, i.e. A is the Pr
because he made the original promise with B, is in privity with B, not receiving a
benefit, and the promise will benefit the TP.
b. Step 2: Determine if the TP is a TPB
i. Intent to Benefit Test?
1. ASK: Did the Promisee intend to provide a benefit to the third party?
a. If YES  TP = intended TPB
i. TP has rights under the Pr/Pe promise, i.e. CAN SUE.
ii. Go to STEP 3
b. If NO  TP ≠ TPB, only an incidental beneficiary
i. TP has no rights under Pr/Pe promise, CANNOT SUE.
c. Step 3: Determine if the Promisor’s promise is enforceable
i. Look to see if promise was supported by consideration, does Statute of Frauds
apply, was there a condition precedent, do any of the avoidance doctrines
apply…is the promise enforceable? [“If a gift”, NO C/”If a contract”, YES C]
1. If YES  go to STEP 4
2. If NO  there’s NO CONTRACT, and the TPB can have NO rights.
d. Step 4: Determine if the TPB is a creditor beneficiary, or a donee beneficiary
i. Ask, does Pe owe TPB a legal obligation, binding the promisee and the TPB
1. If YES  TPB = creditor beneficiary
2. If NO  TPB = donee beneficiary
ii. Note: both the creditor beneficiary and donee beneficiary have the right to sue.
Make the distinction because it matters in case of (1) novation, and (2) if parties
want to change the contract.

NOTE: Go to Step 5 ONLY IF Pr and Pe want to CHANGE THE CONTRACT to the detriment of TPB!!!

e. Step 5: Determine when the rights of the TPB vest

i. Q1: may the promisor or promisee change their contract to the detriment of the
TPB?
ii. Q2: when do the TPB’s rights vest?
iii. Depends on which Restatement (I/II) you use. In THIS CLASS, we will use the
hybrid.
iv. Hybrid Test (developed from Rest.1 by courts)
1. Creditor beneficiary rights vest on reliance
2. Donee beneficiary rights vest when knows and assents
v. Rest.1 (Pure)
1. C-B’s rights vest on reliance
2. D-B’s rights vest immediately (not followed by courts)
vi. Rest.2
1. Same for all intended beneficiaries (C-B and D-B), intended beneficiary
rights vest when the beneficiary…

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a. Material reliance
b. Brings suit, OR
c. Assents per Pr or Pe request
2. The Restatement 2 Changes
a. Labeling some parties (particularly in business dealings) ‘donee’ doesn’t sound correct.
b. So Rest.2d changed lingo
i. Rest.1 – intended beneficiaries: credit beneficiary v. donee beneficiaries
ii. Rest.2 – intended beneficiaries: “debt” v. “gift” beneficiaries
c. Changes didn’t stick, WE’LL USE Rest.1 Language
3. Historical Development of Beneficiary Rights
a. The general English rule was that third party could NOT sue because he was not a party
of the contract between the promisee and promisor [No privity of contract]
i. The third party was merely a beneficiary of the trust

b. Lawrence v. Fox (1859)—allowed third party to rule without an express trust agreement
i. Step 2: H (Pe) intended to provide benefit to L (TP)
Fox Holly
so L is the intended beneficiary (Pr) (Pe)
ii. Step 3: the promise is enforceable because there is
suit
consideration H owes L
iii. Step 4: legal obligation exists between H (Pe) and L Lawrence $300
(TPB) so L is a creditor beneficiary. (TP)

iv. THUS, L has the right to sue Fox

c. Seaver v. Ransom (1918)—TP may recover as long as intended to have a benefit

provided for them by the Pe.
i. Step 2: Wife (Pe) intended to provide benefit to
niece (TP) so niece P is the intended beneficiary Promise
Judge Wife
ii. Step 3: the promise is enforceable because there is (Pr) (Pe)
consideration (the wife’s right to change her will
suit
while she is giving up in exchange for Judge agreeing
to leave niece the house in his will). Niece
(TP)
iii. Step 4: there is NO legal obligation between wife
(Pe) and niece (TPB) so niece is a donee beneficiary
1. Thus, the court expands on the old Four Limits to Recovery:
a. Creditor beneficiary type of case (Lawrence)
b. Contract for benefit of wife, child, or fiancé
c. Public contract/trust case
d. Person present when promise made (direct promise)
iv. THUS, niece has the right to sue Judge

d. Moch v. Rensselaer (1928)

Rensselaer Promise
i. Step 2: City (Pe) did NOT intend to provide benefit (Pr) City
to Moch (TP), so Moch is an incidental beneficiary (Pe)
1. Cardozo, J. says no legal duty by city to
suit
provide its inhabitants protection against fire.
2. If city wanted intended beneficiaries, those Moch
(TP)
individuals must be named, which is not the
case here.
ii. THUS, P is incidental beneficiary and he CANNOT sue because no rights under
the Pr/Pe promise.

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4. Novation
a. Definition:
i. A new or substituted contract
ii. All three parties must agree [to substitute one person for another], but not at the
same time.
iii. Novation NEVER IMPLIED
iv. Court don’t presume novations lightly
1. L (TP) grunts at Fox (Pr) promising to pay L for Holly’s (Pe) debt on H’s
behalf  grunt insufficient for a novation.
2. Inquiry knowledge or just knowing about it  insufficient for novation
3. Podium (Pr) expressly calls Law School (TP) and tells them he has
promised to make speech on Chalk’s (Pe) behalf. Law School accepts 
sufficient for novation.
a. Law school can only sue Podium, as Chalk is released
b. COME BACK AFTER DELEGATION
b. Absent a Novation:
i. If you’re a creditor beneficiary  you can go sue either Pr or Pe.
ii. If you’re a donee beneficiary  you can sue ONLY Pe.
5. Expanding the Use of TPB Concept
a. Blair v. Anderson (1974)
i. Step 2: Gov (Pe) intended to provide benefit to Fed Promise to
prisoner (TP) so Fed prisoner is an intended hold fed
State of DE prisoner US Fed
beneficiary (Pr) Gov (Pe)
ii. Step 3: the promise between the Pr and Pe is
enforceable because there is a valid contract suit Yes intent
iii. Step 4: there is a legal obligation between Gov (Pe) to benefit
and Fed prisoner (TPB), which is the right of Fed Prisoner
(TP)
protection, so Fed prisoner is a creditor beneficiary.
1. [If you’re a creditor beneficiary  you can
go sue either Pr or Pe]
iv. THUS, Fed prisoner can sue State of Delaware
b. Bain v. Gillispie (1984) Promise to call Big 10
i. Step 2: Big 10 (Pe) did NOT intend to provide benefit a good game Conference
Bain ∏ (Pe)
to G (TP) so G is an incidental beneficiary (Pr)
1. While there is an indirect benefit to G, the
suit NO intent
Court said there was NO intent to benefit G to benefit
ii. THUS, G is only an incidental beneficiary, and he Gillispie ∆
CANNOT sue because he has no right under the (TP)
Pr/Pe promise
6. Rights of the Parties
a. To discuss parties’ rights you ask two questions
i. May Pr or Pe change their contract to the detriment of the TPB?
1. But, to answer Q1, you must first ask…
ii. When do the TPB’s rights vest?
b. Promisor’s Defenses (three categories, last one is omitted for this class)
i. Category 1 Defense—defenses that the Pr would have against Pe that Pr wants
to also try and use against TPB
1. Sub Category A:
a. If the defense/claim arises out of the original contract that
created the TPB  then Pr can use the defense against the TPB
(like SOF)

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b. Ex. 1:
i. Between Pr and Pe is an oral promise to sell a piece of
property, where Pr is to pay price to TPB. TPB isn’t
paid, so he sues Pr.
ii. Pr claims the defense that the promise for the sale of
property was oral, should have been in writing (for SOF)
iii. This is a Category 1, subcategory A Defense—the
defense arises out of the original contract that created the
TPB.
iv. THUS, Pr’s defense is valid.
c. Ex. 2
i. Pr promised Pe that it would provide her with insurance
to benefit TP, at the request of Pe’s employer, TP,
making TP intended TPB. Also, since legal obligation
between Pe and TP  TPB is Creditor-Beneficiary.
ii. Pe stops making payments to Pr, then TPB sent notice of
claim but Pr said policy lapsed because Pe didn’t make
payments
iii. Pr asserts a Category 1 Defense
1. Because defense arose out of the very contract
that it was in with Pe, which created TPB, it’s a
valid defense by Pr against TPB.
2. Subcategory B:
a. If the defense/claim does NOT arise out of the original contract
that created the TPB  then Pr CANNOT use the defense
against the TPB.
i. Ex.
1. Between Pr and Pe is an oral promise (K1) to
sell a piece of property, where Pr is to pay price
to TPB. Also between Pr and Pe is a written
contract (K2) for sale of a boat where Pr is to
just pay Pe. TPB isn’t paid, so he sues Pr.
2. Pr wants to use a defense that arose out of K2.
3. Pr CANNOT use the defense against the TPB
because it is not a valid defense.
ii. Category 2 Defense—defense/claim that Pr has against the TPB him/herself.
1. Q: may Pr use defense/claim against the TPB?
2. A: YES, Pr always has a valid defense against TPB!
3. A TPB’s right against the Pr is subject to any defense/claim arising
from his own conduct or agreement
a. No matter where claim arose, Pr can use the defense against the
TPB.
i. Doesn’t matter whether claim arose from TPB contract
or another contract
b. Ex. 1 (like Fox Case)
i. Pr promises Pe to pay $300 to TPB on valid contract
with Pr. When TPB sues Pr, Pr wants to use as a defense
the fact that Pr already paid TPB
ii. Valid defense because Pr already paid and it’s Pr directly
against the TPB.
c. Ex. 2—Same situation above, ADD:

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i. Pr and TPB have a 2nd contract where Pr agreed to pay

TPB $600 for a car. But when the car is delivered to Pr,
car wasn’t working.
ii. Pr wants to use defense that the first payment ($300)
should cover the 2nd contract.
iii. VALID DEFENSE—because it doesn’t matter if
defense/claim arises out of a separate contract.
c. Vesting of the Beneficiary’s Rights (Step 5 of TPB Step Chart Pink Sheet)
i. Hybrid Test (developed from RI by courts)
1. Creditor-beneficiary’s rights vest on reliance
2. Donee-beneficiary’s rights vest when knows/assents
ii. Result
1. If rights vested  Pr and Pe can NOT modify K
2. If rights NOT vested  Pr and Pe can modify K
iii. Examples of Vesting
1. District 220 v. Village of Hoffman – TPB must be identified before
discussion of vesting.
a. Landowners (Pr) want to annex their land into school district 15
and agree w/Village (Pe) to pay $ to do so in 5 years  if they
don’t annex it the money will go to dist. 220. But Pr & Pe
change their mind and want to extend it to 9 yrs.
b. Dist. 220 claims they were d-beneficiaries and their rights had
vested  so the parties can’t change the agreement.
c. Court held 220 wasn’t even identified beneficiaries much less d-
b! (Dist. 220 & 15 are potentials only)
i. b/c only identification can occur here is if performance
occurs.
ii. Performance put off so identification put off.
iv. Vesting of Creditor Beneficiary (c-b) Rights
1. Creditor-beneficiary’s rights vest on reliance
a. i.e.
i. if c-b didn’t know about the change or the 1st promise 
c-b had no knowledge and no reliance. Rights not vested
and so Pr/Pe can modify K.
ii. if c-b did know of another promise but never reacted to
it/acted on it  c-b had knowledge but no reliance.
Rights not vested and so Pr/Pe can modify K.
iii. if c-b learned of something Pr did and changed his plans,
garnished his wages  c-b shows reliance. Rights vest
and so Pr/Pe can NOT modify K.
v. Vesting of Donee Beneficiary (d-b) Rights
1. Donee-beneficiary’s rights vest when knows/assents
a. i.e.
i. Henry promises to pay Good money w/Good will give
$100/mo. to College. College is intended d-b and knows
about this agreement. Pr/Pe decide to ↓ amount. College
objects.
ii. b/c college is d-b and knows/assents (by accepting ea.
mo) of the money, d-b’s rights have vested and so Pr/Pe
can NOT modify the K.

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7. Mortgages and TPBs

 Sue buys a house and takes out a 30-yr. mortgage from bank to help pay for it.
 10 yrs. before the mortgage is paid Sue wants to sell her house to Bob.
 Bob can either ‘assume the mortgage’ or purchase the house ‘subject to’ the mortgage.
a. Assumption of the Mortgage  automatically creates TPB Assumes the mortgage
i. Means… (Pr) (Pe)
New O Original O
1. Original owner has promise with Bank
2. New owner takes original owner’s mortgage
and becomes Pr
TPB
3. Original owner is Pe and Bank is TP Bank
ii. Result…
1. Because of legal relationship between Original owner (Pe) and Bank
(TP)  Bank is a creditor beneficiary
2. C-B can sue Pr or Pe unless there’s a novation
3. Bank most likely won’t agree to novation
b. Purchase “Subject to” Mortgage  NO TPB
i. Means… Original O Bank
1. New owner purchases property subject to the
mortgage
2. Original owner has promise with Bank Takes prop ‘subj2 mortgage’
(Pr) (Pe)
3. New owner makes promise with original New O Original O
owner
ii. Result…
1. Sale price higher because original owner takes on liability
a. New owner promise to pay original owner, NOT Bank.
2. Bank is not TPB in this situation
3. NO TPB CONTRACT IS CREATED
4. New Purchaser is NOT personally liable to the Bank.
c. Break in Assumption
i. Means… Original O Bank
1. Original owner (O0) sold it as
“assumption of mortgage”; then New O1 Assumes Original O
2. New owner (O1) sold it as “subject to
Bank
mortgage”; then
3. New owner (O2) sold it as “assumption
New O2 Subject to New O1
of mortgage”
ii. Problem New O3 Assumes New O2
1. Can Bank go after New O3?
Bank
iii. Result…
1. Majority—Yes, Bank can go after New O3 even though there’s a break
in assumptions
2. Minority—No.

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8. ASSIGNMENT AND DELEGATION

Rights are Assigned; Duties are Delegated
If talking about assignment of a contract; talking about assignment of rights & delegation of duties
a. Pure Assignment of Rights
Obligation
i. Identification of Parties B (obligor) A (assignor)
1. Obligor—party who owes
obligation, promisor Obligation
Notice assigned
2. Assignor—party to whom the
obligation/right is owed, but assign
C (assignee)
the right to another
3. Assignee—party who is assigned the obligation/right
ii. Example
1. B owes A $100 on an enforceable obligation, and A assigns the
obligation to C
a. Before the assignment, A (assignor) had a right to collect the
$100 from B (obligor)
b. After the assignment, C (assignee) has a right to collect the $100
from B (obligor).
c. Obligor (B) really should not care to whom the $100 is paid.
b. When Are Rights Assignable?
i. (Absent novation) Generally, rights are freely assignable, EXCEPT
1. Where an anti-assignment clause applies, OR
2. Right is too personal.
ii. Anti-assignment clause  i.e. “the right to receive this dress is not assignable”
(see below)
iii. What is “too personal” (UCC 2-210(2) for goods, Rest.2d §317 for non-goods)
1. Rights are assignable UNLESS the assignment would…
a. Materially change the duty of the obligor,
b. Materially increase the burden or risk on the obligor,
c. Materially impair the obligor’s chance of obtaining return
performance, OR
d. Materially reduce the value of the return performance to the
obligor.
2. Note: the first 3 above are same for UCC and Rest.2d, but 4th point only
in Rest.2d!
c. Validity of the Assignment
i. Present Intent
1. Manifestation of present intent to transfer assignment must be made to
assignee.
a. I want to assign rights to you now  yes!
b. I intend to assign rights to you  NO, not present intent!
ii. Effective Notice
1. Once the assignee (C) notifies the obligor (B) of the assignment, the
obligor (B) CANNOT pay the assignor (A).
2. IF the obligor (B) does pay the assignor (A), then the obligor (B) must
also pay the assignee (C)
a. I.e. “Double Payment”
i. Herzog – Jones (a/r) assigned his right to get $ from
attny (from suit) away to Dr. H who performed unrelated
surgery. Jones changed his mind didn’t want to pay Dr.

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Attny paid assignor after notice o/assignment was given,

they were held liable & had to pay 2x.
1. Court looked at Jones right to $ from settlement
 no AAC, and not personal (went through R’s
4 steps).
2. Some view this case as giving rise to TPB
contract  even though this is an assignment &
not a delegation!
a. Where attny (p/r), Jones (p/e) and Dr
(intended c-b)
iii. Example
1. Jay (obligor) is to provide G with all the mufflers he needs. G (assignor)
assigns the right to the mufflers to TX (assignee).
a. Step 1: identify parties (done above)
b. Step 2: is there a AAC? No
c. Step 3: is the right too personal? (Goods so use UCC 3-steps)
UCC- too personal? Example—Problem 187
materially change the duty of the obligor, Is Jay’s duty to deliver mufflers
materially changed?
materially increase the burden or risk on the Is there an increase burden or risk on
obligor, Jay to deliver the mufflers to TX than
to G?
materially impair the obligor’s chance of obtaining Is there a chance Jay won’t get paid
return performance. by TX?**

** if obligor has reasonable grounds for insecurity UCC 2-609 allows him to
demand adequate assurances.
d. Result of Assignment
i. Once assignor (A) assigns the right, A has NO further interest in the right.
ii. Because assignor’s interest has been transferred to assignee.
e. Gift Assignments—occurs when there’s no obligation between the assignor and assignee
– assignor simply assigning his right out of kindness.
i. Analysis Rest.2d §332 (Step 3 “4 Horsemen”):
1. Step 1. Ask: is the assignment a gift (gratuitous) assignment?
a. If there is no consideration between assignor and assignee/no
security for satisfaction of preexisting debt  it’s a gift.
2. Step 2. Ask: is the gift assignment revocable?
a. Gift assignments are revocable if any of these apply:
i. Assignor dies/incapacitated;
ii. There is a subsequent assignment by the assignor; or
iii. There is not notification from assignor received by
assignee or obligor.
3. Step 3. Ask: is the gift assignment irrevocable?
a. Irrevocable when there is…
i. A (symbolic) writing that’s signed, sealed and delivered
(i.e. passbook to a savings account  this is evidence
that you assign right if you give it to assignee);
ii. A payment or satisfaction of obligation to the assignee;
iii. A suit or judgment for the assignee; or
iv. A new contract by novation.

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f. Assignments for Consideration

i. The obligee must intend to assign the right to someone else
ii. Generally, assignment for ‘C’ can be written or oral
1. EXCEPT
a. Assignment of right to property  must be in writing (SOF)
b. Assignments of an interest in accounts receivable (Article 9) 
must be in writing, signed by assignor
i. Article 9 does NOT apply to the creation of interest
1. in realty
2. wages
3. bank accounts
4. insurance
5. or other certain collateral.
a. These matters are regulated either by the
CL or by special statutory provisions.
iii. UCC Article 9
1. Applies to money rights from goods received or services rendered.
2. On exam if there’s issue regarding parties’ right to receive payment for
bananas  say
a. Article 2 (A2) applies b/c bananas are goods (movable at time of
identification to K), AND
b. Article 9 (A9) applies b/c money rights from goods are
concerned (pmt).
g. Partial Assignments
i. In general partial assignments are OK, just as good as full assignment of the
entire right.
1. Still must check for 1) AAC, and 2) too Right to 4,000 carloads 
personal factors Sammy Betty
(obligor) ←$ (assignor)
ii. Example (Problem 190)
Assigns rights to
1. Betty partially assigns her right to ½ o/bananas
receive half of the 4000 carloads of Assignment K

bananas due to her from Sammy to

Stateside. Stateside
(assignee)
2. Can Betty partially assign her right?
a. No AAC
b. Personal? Goods, look at UCC, will the partial assignment...
i. Materially change the duty of the obligor (Sammy)? No
ii. Materially increase the burden or risk on the obligor
(Sammy)? No
iii. Materially impair the obligor’s (S) chance of obtaining
return performance? No
3. So the partial assignment is effective.

h. Successive Assignment (assignor commits fraud in this situation)

i. Rule: first in time is first in right,
(obligor) (assignor)
UNLESS:
1. One of the assignees is a BFP
(bonefied purchaser) w/out notice (assignee)1 (a/e)2 (a/e)3
of previous assignments, AND
2. One of the “4 horsemen” apply

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i. Anti-Assignment Clauses (AAC)

i. General Idea
1. This is 1st prong test to see if assignment is effective (the other being ‘too
personal’)
2. If you’ve a AAC that prohibits “assignment of the contract” for
PURPOSES OF EXAM (do separate analysis) treat it as 
a. An anti-assignment clause (AAC), AND
b. An anti-delegation clause (ADC) [ADC always effective unless
waived]
ii. 1st Check for Money Rights: Does the AAC deal with a non-money right or a
money right?
1. Non-Money Rights  AAC enforceable, unless there’s bad faith (see
Cheney v. Jemmet)…i.e. obligor must act in good faith.
a. Examples of non-money rights:
i. Right to buy land
ii. Right to buy goods
iii. Right to particular services
2. Money Rights  AAC may or may not be enforceable, look at Article
2 and Article 9 to see where money coming from/source (below)
a. Examples of money rights:
i. Accounts receivable
ii. Proceeds
3. Article 2 (money rights)
a. Nature of money rights is deals with right to money from the sale
of goods
i. If the right to money is “unearned”  AAC is effective
(you can’t assign the right)
ii. If the right to money has been “earned”  AAC is NOT
effective (you can assign the right)
1. Right to money “earned” = goods have been
tendered or delivered, and all that is left under
the contract is to pay money.
iii. So contract with AAC means you CANNOT assign
unless the money has been “earned” (goods have been
tendered or delivered and all that’s left is to pay $)
4. Article 9 (money rights)
a. Nature of money rights is from the transfer for the value of
accounts receivable, right to money that is from
i. Payment for goods sold or leased, or
ii. Payment for services rendered.
b. A term is “ineffective” if it prohibits an assignment of an
account.
i. Meaning, AAC is NOT effective so you can assign those
rights despite the AAC
Article 2 Article 9
AAC is effective, UNLESS the right to AAC is not effective if you’re dealing
earn money has been “earned”. with accounts receivable for goods sold
or leased, or services rendered.
Contract with AAC means you cannot K with AAC means you can still assign if
assign unless the money has been dealing with accounts receivable for goods
“earned. sold or leased, or services rendered.

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iii. 2nd Check for source of money: When are AAC dealing with Money Rights
enforceable?
1. If the source of the money is from
a. Land (money rights from sale of land)  AAC effective
(Article 9 NOT apply)
b. Services  AAC NOT effective (Article 9 applies)
c. Goods  AAC NOT effective (because the right to money has
been earned) (under either A2 or A9)
i. Discuss money being earned under both A2 & A9, but
for EXAM CONCLUSION PURPOSES we always
ASSUME the money has been EARNED.
d. Wages, Insurance Policy, Bank Account, Realty  AAC
Effective, unless bad faith (Article
9 NOT apply) Assigned K
j. Setoff and Recoupment (Defenses obligor has against the (obligor) (assignor)
assignor)
i. Recoupment – defenses arising from the assigned Assignment K
K
1. Valid defense for obligor to use against (assignee)
assignee
ii. Setoff – defenses NOT arising from the assiged K
1. May only be used if the defense “accrued”
before the assignee gave notice to the 12/12/68
(obligor) (assignor)
obligor.
i. K COA “accrues” when there is a 12/13/68
breach Notice
12/13/68
2. Once notice is given, if COA accrues after
that notice  it won’t be a valid defense. (assignee)
st
3. Example (Seattle 1 National Bank Case)
a. breach occurs 1/3/69
b. b/c breach occurred after notice  CANNOT use setoff as a
valid defense
k. Waiver of Defense Clauses
i. “Obligor agrees not to use any defense against the assignee which the obligor has
against the assignor”
ii. These are INVALID because
1. Against public policy
2. A9 permits them but they are prohibited by a J’s statute
l. Modifications
Assigned K
i. Can the Obligor and Assignor change the (obligor) (assignor)
“assigned contract” once there has been an
assignment? Assignment K
1. 9-405 (a): YES
a. If in Goof Faith
(assignee)
2. Consequences (but be careful b/c it…)
a. gives the assignee corresponding
rights under the K as modified AND
b. the modification may be breached by the assignor’s agreement
w/the assignee.

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c. Example
i. John made maps and sold them Assigned K
to Auto at $5k/map. John Auto
Maps for $
John
borrowed $30k from Bank and (obligor) (assignor)
assigned the Auto pmts to the Right 2$ from maps
Assignment K
bank towards the loan they
gave him. The quality o/his Bank
maps weren’t as good as Auto (assignee)
anticipated so instead o/$5k,
they gave him $4k. Bank protested the change. Is bank
bound by the modification?
1. Yes, b/c no evidence John wasn’t acting in GF
m. Warranties of the Assignor – A warranty is a K action,
Assigned K
thus if you breach a warranty, you breach a K. (obligor) (assignor)
i. Three warranties of the assignor (to the assignee)
(Rest.2d §333) Assignment K
1. Won’t defeat or impair the value of the
assignment (good faith)
(assignee)
2. The right actually exists
3. The writing is genuine
ii. NOTE – assignor does NOT warrant that the obligor is solvent or that obligor
will perform.
n. Pure Delegation of Duties
i. Terminology B (POD)
Duty
A (delegator)
1. Identification of Parties
a. Person Owed Duty (POD) – person to whom duty owed Delegation of
b. Delegator – person who originally has the duty but delegates Duty

it to another
c. Delegatee – person to whom duty is delegated C (delegatee)
2. Example: A owes a duty to B (i.e. to paint B’s house), and A delegates
the duty to C.
i. Performance by C (delegatee) will be the performance of
A (delegator), BUT
ii. Non-performance by C (delegatee) is a breach by A
(delegator).
ii. When Are Duties Delegable?
1. Ask: May the delegator (A) delegate the duty to perform to the
delegate (C)?
a. Yes, if the duty is commercial, performance is capable of
objective evaluation
i. (UNLESS anti-delegation clause).
b. No, if the duty is personal, aesthetic, performance is not capable
of objective evaluation
i. (UNLESS POD waives non-delegability/grants
novation)
iii. Validity of the Delegation
1. Delegation is valid
a. where the duty being delegated is of a commercial nature,
b. where the duty being delegated is of a personal nature but there
is a novation.

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iv. Anti-Delegation Clauses

1. will be effective (as opposed to AAC w/may or may not be effective)
2. i.e. “I delegate the duty to paint Bob’s pic to Sue and Sue cannot delegate
this to any one else’.
v. Result of Delegation
1. There is no way for delegator (A) to divest himself of the duty to perform
without the consent of the person to whom the duty is owed (B),
UNLESS
2. a novation occurs
a. where the person to whom the duty is owed (B) agrees to
substitute the delegatee (C) in place of the delegator (A) and
releases the delegator (A) from liability.
b. i.e.
i. Prof. Chalk delegated duty to Prof. Podium, is it
personal or commercial?
ii. Personal b/c Chalk’s ability/credentials are personal and
cannot be delegated UNLESS the POD (law school)
grants novation. Which is what law school did in that
example.

vi. Effective Delegation = TPB K !!!

1. To make the delegation “effective”, the delegatee must promise the
delegator to perform the duty owed to
the POD. Duty
B (POD) A (delegator) (Pe)
a. The delegatee’s promise to the (TPB)
delegator always creates a TPB Promise to Delegation of
perform owed Duty
contract. to POD
2. TPB K
a. The delegatee has “promised to C (delegatee) (Pr)
perform the duty” owed to the POD (person to whom the duty is
owed).
b. This promise is made to the delegator which
is for the benefit of the person to whom the Pr (C) Pe (A)
duty is owed (POD), so
i. Pr = delegatee (C)
ii. Pe = delegator (A)
iii. TPB = POD (B to whom duty is TPB (B)

owed)
1. The TPB K is always a creditor beneficiary (c-
b) K, thus
2. Both delegator and delegatee are liable to B
(UNLESS there’s a novation).
a. B can sue either A or C (if novaiton 
can sue only Pr (C))

o. Mixed Assignment and Delegation B obligor/(POD)

K A (assignor/
delegator)/ (Pe)
i. Occurs when a party “assigns the contract” (TPB)
1. General Rule: when you assign the “K assigned”;
right to 1k
K, you assign the rights and delegate assigned, duty to
the duties (Restatement) paint delegated

C (assignee/
delegatee) (Pr)

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2. Langel v. Betz – court doesn’t follow rule and the ∆ did not have duty to
buy the land. Still good law b/c rule comes from Restatement w/is
suggestion and not authoritative source.
ii. Example
1. A has a K w/B to paint B’s house for $1000 and A “assigns the K” to C.
2. This means NOT ONLY that 1) A has assigned to C the right to receive
from B the $1000, BUT ALSO 2) A has delegated to C the duty to paint
B’s house, that is:
a. $1000 only due when house painted
b. If C fails to paint the house, A is still liable to do so UNLESS B
releases A by novation.
3. May the right be assigned?
a. YES, rights are freely assignable, generally, UNLESS
i. AAC or personal (check RII or UCC).
4. May the duty be delegated?
a. YES, painting a house is commercial and performance is capable
of objective evaluation (unless there is an ADC).

FOR EXAM – analysis of assignment and delegation + TPB should be SEPARATE!

_____________________________________________________________________________________
AVOIDANCE OF CONTRACT DOCTRINES
1. MISTAKE—an unintentional act or omission arising from ignorance, surprise, or misplaced
confidence. The mistake must be material, meaning it is so substantial and fundamental as to
defeat the object of the parties.
a. Mutual Mistake
i. Both parties, at the time of contracting, are mistaken about the same basic
assumption or vital fact upon which they based their bargain.
ii. Both parties must be equally innocent as to the mistake
1. Each having the same knowledge or lack of knowledge about the mistake
iii. Categories of Mutual Mistake:
1. Mistake in Expression (Misunderstanding)
a. “Pure” mutual mistake  no mutual assent  set contract aside
i. “Ships passing in the night” (Raffles Case).
2. Court-Allocated Mistake
a. Mistake regarding the existence or identity of the subject matter
 set contract aside (see Cow Case)
b. Mistake in value of the subject matter  do NOT set contract
aside (see Rock Case)
i. Because there’s assumption of a risk when parties
contract for something that they don’t know the value of.
c. Mistake in operation of the subject matter  set contract aside
i. NOT in casebook
3. “Cow” v. “Rock”
a. Cow – neither party aware that the cow is barren  mutual
mistake in the existence or identity  contract set aside
b. Rock – rock found, neither the jeweler nor the seller know what
it was  mutual mistake in value  contract NOT set aside
i. Parties both assumed a risk

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4. Distinguish “Cow/Rock” Examples

a. Cow: Mistakenly Lou thinks he’s father of Sue’s kid and
promises to pay child support. After test it’s found he’s not the
father, so he stopped paying. Sue sued for the payments.
i. This is mistake as to the existence or identity of the
subject matter  set contract aside
b. Rock: Guy buys safe at estate auction for $50, once opened he
finds $30K inside. Estate wanted the money back. Who wins?
Buyer.
i. This is mistake in value of the subject matter  do NOT
set contract aside
b. Unilateral Mistake (Harder to set this kind of contract aside then it is to set mutual
mistake contract aside)
i. Types:
1. Mistake in identity of offeree
2. Mistake in computation or calculation
3. Mistake in judgment  NO relief
ii. Test: To determine whether or not court will grant relief…
1. Ask: Did the non-erring party know or should’ve known of the error?
a. YES  set contract aside
b. NO  let contract stand
iii. FIVE Supplemental Balancing Factors (set out in 1st Baptist Case)
1. Is the mistake material? (ALWAYS required)
2. Would enforcement be unconscionable?
a. I.e. would it be unconscionable to make X build 100-story bldg
for $1million? Yes!
b. If not unconscionable, but still a mistake Corbin says they can
agree NOT to set contract aside.
3. Mistake NOT the result of negligence or violation of a positive duty?
4. Is it possible to put the non-erring party in the status quo ante?
a. Can u bring them back to the position they were in before the
contract?
5. Was prompt notice give?
a. As soon as you see ‘000’ missing do u call bidder & correct?
FIVE Supplemental Balancing Factors 1st Baptist Case
1. Is the mistake material? Yes it would cause comp. loss, and it
was half the amount as next lowest
bid.
2. Would enforcement be unconscionable? Maybe, construction comp may suffer
loss.
3. Mistake NOT the result of negligence or Simple clerical error.
violation of a positive duty?
4. Is it possible to put the non-erring party in Yes by allowing retraction of bid.
the status quo ante?
5. Was prompt notice give? ?
RESULT Super low bids were cause by clerical
error and NOT made in bad faith so
the contractor who submitted it may
retract it.

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c. “Snap It Up” Doctrine

i. If too good to be true  court will set contract aside.
1. I.e. you’ve been dealing w/Sue for 1wk over King to buy her horse. She
blurts out fine I’ll sell you the cow. You make her sign the contract for
the cow. But she realizes her error. Court will set your contract aside
because you’re not allowed to ‘snap up’ the erring offer.
ii. If (before acceptance) offeree knows or should know a material error has been
made, but accepts anyways, the courts will set the contract aside.
iii. Offeree not allowed to ‘snap up’ such an offer.

2. FRAUD (MISREPRESENTATION)—i.e. lying to someone, “an assertion that is not in accord

with the facts
a. Two Categories of Fraud:
i. Fraud in Factum/Execution (rare)
1. Where the legal instrument as actually executed differs from the one
intended for execution by the one who executes it
a. I.e. – blind person thinks they’re signing a letter but are signing
away their house mortgage.
ii. Fraud in the Inducement (Two Types; both equally actionable so long as
four elements are met in each):
1. Material Misrepresentation
a. There was, in fact, misrepresentation.
b. The misrepresentation would cause a reasonable person to enter
the contract OR
i. The misrepresenter knows or should have know that the
misrepresentation would cause THIS particular person to
enter the contract.
c. The misrepresentation induced the person to make the contract.
d. The person was justified in relying on the misrepresentation 
i. Reliance is judged by whether a reasonable person
would have known that the assertion does not comport
with the facts.
2. Fraudulent Misrepresentation
a. There was, in fact, misrepresentation.
b. The misrepresenter knows the assertion is false, and intended to
cause the other to rely on it and enter into the contract OR
i. The misrepresenter makes an assertion of fact knowing
that he does not have an actual basis for doing so and
intended to cause the other party to rely on it and enter
into contract.
c. The misrepresentation induced the person to make the contract.
d. The person was justified in relying on the misrepresentation 
i. Reliance is judged by a subjective test, it doesn’t matter
how bizarre the scheme is, so long as there was reliance
by THIS person.
3. Argue both of the above on the exam:
a. “…this is a material misrepresentation because when we apply
the reasonable person test… but it could also be a fraudulent
misrepresentation because under the subjective test…”

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b. Gravel Case – appeals court applies both objective and

subjective test but says no need to decide which of 2 types of
fraud in the inducement it is – lower court can do this.
b. Voidability of Contract—For a misrepresentations to make a contract voidable:
i. There must have been a misrepresentation,
ii. The misrepresentation must have been either fraudulent or material,
iii. The misrepresentation must have induced the recipient to make the contract,
AND
iv. The recipient must have been justified in relying on the misrepresentation.
c. Opinion v. Fact (see Vokes v. Arthur Murray)
i. Misrepresentation must be one of fact rather than opinion.
1. Because opinions are generally NOT actionable.
ii. Exceptions (4) to the rule (statements made as opinions are actionable):
1. Where there’s a fiduciary relationship between parties
2. Where there has been some trick employed
3. Where the parties do not in general deal “at arm’s length” (not on =
playing field because 1 has superior knowledge)
4. Where the representee does not have equal opportunity to become
apprised of the truth or falsity of the fact represented
iii. *Fiduciary Relationship – Doctor-patient, attorney-client
iv. *Superior Knowledge – where the misrepresentor has superior knowledge of the
situation, the courts have deemed opinions fraudulent because courts want to
protect the weaker of the two.

d. Sidestepping General Rule on Opinions

i. It is possible to have a misrepresentation of opinion – “the state of man’s mind is
as much a fact as the state of his digestion”.
ii. If you can show by evidence that someone’s opinion is a false opinion from the
start  the ‘opinion’ is actionable.
1. I.e. car dealer tells Sue car won’t break down within 6 mo. of today and
if it does ill fix it. She buys the car and a week later it breaks down he
refuses to pay. You have witness that says ½ hour before she bought
dealer told him car was lemon and wouldn’t make it a week.
e. Conduct
i. Fraud doesn’t necessarily consist of verbal or written statements  conduct by
itself can be fraudulent.
1. Where a plaintiff takes affirmative steps to conceal a problem a
misrepresentation occurs.
ii. I.e. car dealership spray paints slight nicks on car side, rolls back odometer.
f. Nondisclosure Is = To An Assertion
i. A person’s nondisclosure of a fact known to him is = to an assertion (like a lie)
when
1. The nondisclosing person knows disclosing a fact prevents a previous
fact from being a misrepresentation or fraudulent,
2. The nondisclosing person knows disclosing a fact corrects a mistake the
other party holds as an assumption under w/the other party is making the
contract,
3. The nondisclosing party knows the other person is entitled to know the
fact b/c of a relation of trust and confidence between them.
ii. I.e. Rabbi failed to mention his past criminal history and disbarment as an
attorney when hired by synagogue

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g. Duty to Investigate
i. Split of authority – trend is to place a minimal duty on the buyer
ii. But if there’s intentional, willful fraud court will want to benefit the
nonfraudulent party, whoever (buyer/seller) it turns out to be.
h. Innocent Misrepresentation
i. A buyer of land (relying on innocent misrepresentation) is barred from recovery
only if the buyer’s acts in failing to discover defects were wholly irrational,
preposterous, or in bad faith.
i. Punitive Damages
i. Fraud suits carry the possibility of substantial punitive damages.
ii. Need intentional conduct that is “malicious, oppressive, or gross”.
j. Example of Material Misrepresentation
i. Navy guy’s writ of habeas corpus (seeking rescission of his enlistment contract)
would probably be granted b/c navy made a material misrepresentation which
induced John to enlist.

3. DURESS—Think Sopranos violence/threat of or forced into contract

a. The wrongful act OR threat of a wrongful act that overcomes the free will of a party.
i. Wrongful Act
1. Violence or threat of violence
2. Impairment or threat of impairment
3. Wrongful seizing or withholding goods
4. Other wrongful acts (extortion or blackmail)
b. Economic Duress
i. Elements of ED:
1. The party alleging ED must show he has been the victim of a wrongful or
unlawful act or threat, AND
2. Such act or threat must be one which deprives the victim of his
unfettered will.
ii. Totem Test: Factors of Economic Duress
1. One party involuntary accepted the terms of another,
2. Where circumstances permitted no other alternative, AND
3. Such circumstances were the result of coercive acts of the other party
a. When economic duress or business compulsion, plaintiff must go
beyond the mere showing of reluctance to accept and financial
embarrassment. Must show it was the acts of the plaintiff that
caused the 2 factors.
c. General Points of ED
i. A threat to breach a contract or to withhold payment of an admitted debt
ii. MUST be done in bad faith
iii. Must have no choice but to agree to the other party’s terms or face serious
financial hardship

4. UNDUE INFLUENCE—brainwashing.
a. A combination of the victim’s weakness AND another party’s taking advantage of those
weaknesses.
b. Weakness can be from:
i. Illness
ii. Age
iii. Immaturity (apart from age)
iv. Trauma (death of child/spouse)

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v. Substance Abuse
c. Confidential/Fiduciary Relationship
i. The existence o/a confidential relation requires the dominant party “to exercise
the utmost good faith and to refrain from obtaining any advantage at the expense
of the confiding party” – Kase
1. Old lady who sold house at super low int. rt. had actually advised an
attorney but insisted on rt.
d. Odorizzi Case
i. Not duress because no wrongful act, not fraud because no misrepresentation of
facts, not mistake, because no mistake in fact or law,  correct cause of action
for plaintiff is “undue influence” because of over persuasion.
1. Doesn’t matter if plaintiff was actually guilty.
e. Factors of Over-Persuasion (Don’t need all):
i. Discussion of the transaction at an unusual or inappropriate time
ii. Consummation of the transaction in an unusual place
iii. Insistence demand that the business be finished at once
iv. Extreme emphasis on untoward consequences of delay
v. The use of multiple persuaders by the dominant side against a single servient
party
vi. Absence of 3rd party advisers to the servient party
vii. Statements that there is no time to consult attorney or financial advisors

5. ILLEGALITY—“void as a matter of public policy”

a. Contract may be void or voidable and thus unenforceable…
i. Because its for an illegal or criminal purpose,
ii. As a matter or public policy, or
iii. Because it violates a regulating scheme that’s meant to regulate conduct.
b. Violation of a Regulating Scheme
i. Two Types of Regulatory Schemes:
1. Consumer Protection
2. Licensing of Professionals and Trades
ii. To See if Contract upheld  Look at Purpose of the Regulating Scheme
1. Regulate Conduct  set contract aside (usually)
2. Raise Revenue  probably uphold contract and impose fine
iii. Examples
1. Regulate Conduct contract set aside: Hill had a garage and he
agreed to fix May’s car for $50, but he ended up charging her $500 when
she came to pick it up. He violated a state law saying all repairs must be
in written estimates (see Bennett v. Hayes)
a. May doesn’t have to pay the $500 because the purpose of the law
was to regulate conduct so we set the contract aside.
b. Quantum Meruit NOT available to Hill even though he provided
the service because it would defeat whole purpose of the law,
which is to protect consumers.
2. Regulate Conduct contract upheld: Sam failed the bar but wrote up
a will for Mary anyway. When she found out he lied she refused to pay
him (see Problem 124)
a. Even though the purpose of the bar is to regulate conduct, Mary
will have to pay because you don’t need a license to practice law
in order to draft a will.
b. Sam will be fined though.

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3. Raise Revenue: MI requires companies who provide credit to their

customers to pay a fee and get a MI license for the service. Garfield
Department Store never got a license and provides the service (see
Problem 125)
a. Purpose of the regulating scheme is to raise revenue so contract
upheld between Garfield and his credit clients.
b. Garfield will be fined though.
c. Contract Affecting Marriage
i. General Rule: Unmarried cohabitant may recover IF there is independent
consideration because “love and affection” are insufficient forms of
consideration in contract law.
ii. Types
1. Unmarried cohabitant with business and personal relation  may
recover for business ONLY
2. Unmarried cohabitant with only personal  may NOT recover
iii. Carnes –
1. Even if the two cohabitants had an express contract, it would not have
been upheld because…
a. No additional independent consideration, and
b. It’s the role of legislature to decide, and they’d already decided
 outlawed common law marriage
d. Contract in Restraint of Trade (Covenants Not to Compete)—Generally contract in
restraint of trade is illegal
i. Restrictive covenants are enforceable if…
1. There is a need for protection, and
2. The clause is reasonable (Test 1)
a. The seller/employee has unique talents, knowledge, or abilities
i. I.e., what is being restricted
b. The area the injunction will cover is reasonable (spatial
limitation)
c. The time period of restraint is also reasonable (time limitation)
3. The BDO Test (reasonableness of restraint)
a. The restraint is no greater than is required for the protection of
the legitimate interest of the employer
b. The restraint does not impose undue hardship on the employee
c. The restraint is not injurious to the public
ii. Blue Pencil Doctrine – Courts can change/modify restrictive covenants that are
too broad in their protection of a legitimate interest.

Factors to look at to see if Example – Peter worked for X an adhesive tech

restrictive covenants are
reasonable…
1. Extent of the restriction
(what is being restricted)
2. Spatial (geographical)
3. Temporal (time)
company for 5 years. His contract had a restrictive
covenant.
Peter can’t work for Y for 2 yrs. after leaving X v.
Peter can never work in the adhesive industry
again.
Peter can’t work for a competitor of X’s in M City
for 12 mo. after leaving v. Peter can’t work for
any of X’s competitors in the US
Same as example in #1.

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6. INCAPACITY—not having the power to contest (mental or child).

a. Minors—In most states minors (infants) lack capacity to contract if under age of 18.
i. Bright Line Rule: A minor can disaffirm a contract if he chooses, but the
other party CANNOT!
1. To disaffirm minor simply indicates he no longer wants to be bound by
the contract.
2. Exception: A minor CANNOT disaffirm a contract for necessaries –
a. Food
b. Clothing
c. Shelter
d. (Maybe life-saving services)
ii. Getting back value of services provided to the minor by other party.
Example: 17 yr. old Val has a truck hauling company makes a lot of $/year. She
had her truck serviced by White who charged her $7k. White fixed the truck. Val
decided to disaffirm. Does Val owe the $7K?
1. Majority Rule – NO! Minor not liable for any amount.
a. Rationale: public policy, White and others shouldn’t “contract
with our kids.”
2. Minority “Benefit” Rule – minor who disaffirms a contract may be held
liable for benefits received even though not necessaries and even though
benefits cannot be returned in kind.
iii. Minor’s Misrepresentation—Problem 127—Minor lied about his age on an
application approving a test drive. He wrecks the car and goes to the dealer
claiming he’s disaffirming the contract so he won’t have to pay for the wreck.
a. Minor CAN PROBABLY disaffirm the contract
i. Oral v. Written
1. Oral, disaffirm
2. Written, might not be able to disaffirm
b. BUT, he’s probably liable in tort.
b. Mental Infirmity
i. A judge declared mental infirmity absolutely VOIDS a contract, BUT…
1. A rebuttable presumption of incompetence is created.
ii. To see if a contract can be set aside because of mental infirmity we look at
four factors:

Four Factors – if all are met, contract
can be set aside for mental infirmity…
1. How necessary is the contract?
2. How fair is the contract?
3. Did the other side know or should
have known of the incompetence?
4. How great is the hardship if the
disaffirmance is allowed?
Problem 128 – Rex is a mentally ill and
walked into Patty’s dance studio wanting
lessons so he can compete in the Olympics.
Dance lessons aren’t a necessity – not like
contract for food, clothing, shelter, etc.
Not fair, because Patty knows Olympics don’t
have a dance category.
Yes, Patty should know something is up
because of #2 and because he’s extra-friendly.
Not great at all because the dance lessons
didn’t even start.

c. Guardianship
i. NOT ON EXAM!

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d. Intoxication
i. To get out of a contract you entered into while drunk, you
1. Must have extreme intoxication, AND
2. Must immediately disaffirm contract when you come to.
ii. I.e. ‘a few drinks w/buddies’ probably not indicative of extreme intoxication.

7. UNCONSCIONABILITY–i.e. extremely unfair

a. UCC §2-302 & Rest.2d §208 [similar on unconscionability]
i. If contract, or part of the contract, is unconscionable, the court can:
1. Throw out the entire contract, OR
2. Delete the unconscionable language and enforce the contract, OR
3. Modify the unconscionable language and enforce the contract.
ii. UCC 2-302
1. Protects merchants and consumers the same. However, merchants have
more bargaining power.
b. What Does Unconscionable Mean?
i. UCC 2-302:
1. It’s a matter of law (judge’s question to determine when we have it).
2. Parties shall enter evidence regarding the charge.
3. Judge must look at unconscionability at the time the contract was entered
into.
ii. Professor Leff: For court to find the contract, or some part of the contract
unconscionable, BOTH must exist:
1. Procedural Unconscionability—unequal bargaining power
(age/experience), unfairness in the bargaining process; AND
2. Substantive Unconscionability—harshness of the terms, text of the
contract itself.
a. Example: grossly excessive price
iii. Courts Split
1. Agree w/Leff: [Procedural + Substantive = Unconscionability]
a. Williams v. Walker-Thomas Furniture Co.
i. Plaintiff on govt. help, low income with 7 kids and
retroactive rep for furniture she already paid for =
unconscionable contract
ii. To determine its existence, look at all circumstances
surrounding the transaction:
1. Gross inequality of bargaining power,
2. Manner in which the contract was entered into,
3. Each party’s understanding of the terms,
4. Presence of hidden terms.
2. Disagree w/Leff: [Substantive Alone = Unconscionability]
a. Scott v. Cingular Wireless
i. Here, a strong showing of substantive unconscionability
is sufficient in itself to avoid a term in the contract
ii. Sometimes helps confirm or provide evidence of
procedural unconscionability.
c. Adhesion Contracts
i. Presented on “take it or leave it” basis
ii. Usually a standard form contract, containing harsh, nonnegotiable terms
iii. High burden to prove because people have the freedom to contract, and courts
don’t protect people from bad deals

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d. Exculpatory & Indemnification Clauses

i. What are they?
1. Exculpatory clause – releases the party from liability.
2. Indemnification clause – one party agrees to ‘answer for’ any liability or
harm the other party might incur.
a. Also called “hold harmless” clause/provision.
ii. NOT Unconscionable!!
1. Common and often paired together.
iii. Exception
1. Coat check tickets with clauses on back or signs  might NOT
exculpate restaurant when the plaintiff does not know or see the sign.

8. IMPOSSIBILITY & FRUSTRATION OF PURPOSE: i.e. it cannot be done, OR the reason I

entered into this contract doesn’t exist anymore
a. Occurs after the contract was entered into BUT before performance.
b. General Principle:
i. A promisor must either…
1. Perform the promise OR
2. Pay damages for failure to perform, no matter how burdensome
performance has become as a matter of unforeseen, unexpected
circumstance.
ii. EXCEPTIONS (i.e. avoidance occurs when…):
1. When an unforeseen, unexpected event, which occurs after
formation of the contract but before the time when performance is
due, makes performance impossible, AND
a. Destruction of a thing essential to the contract
b. Death or incapacity of a person essential to the contract
2. Excuse of performance because of “frustration of purpose”
c. IMPOSSIBILITY:
i. Factors courts look at to determine if contract should be set aside for
impossibility:
1. Was the thing essential to performance of the contract?
2. Was the thing known by both parties?
3. Was the event unexpected, unforeseen?
4. Was the event caused by no fault from either party?
5. UNLESS one of the parties already assumed the risk, i.e…
a. Risk assumed: construction company accepts offer for which
they bid at certain price but later cost ↑ & project became
unprofitable  CC NOT excused because of impossibility.
b. Risk not assumed: painter paints a room doesn’t assume the risk
that if an earthquake occurs and he’ll have to repaint for free 
painter excused because of impossibility.
ii. Death/Destruction of Thing Essential to Contract
1. UCC 2-613
a. If the loss is total = contract is avoided
b. If the loss is partial (deteriorated) = contract can be avoided OR
i. Goods accepted and price modified accordingly.
2. Example
a. Rose died  loss is total so contract is avoided

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b. Rose is sick on delivery  loss is partial/deteriorated so the

contract as avoided or Sherwood can accept the goods with price
reduction.
c. Sherwood himself dies, contract is still upheld because he’s not
essential to the contract, the cow is!!
3. UCC 2-615 (see problems 136 & 137)
a. Did both parties know the source of the chickens/crop?
i. If not, cannot avoid contract.
d. FRUSTRATION OF PURPOSE
i. The reason party entered into the contract doesn’t exist anymore.
ii. Not an impossibility issue, because the contract is still possible.
iii. Krell
1. Defendant rented apartment to watch coronation, but King sick = no
coronation.
2. Court set contract aside for frustration of purpose.
3. Contract not impossible because he could stay in apartment if he wanted.
e. Force Majeure Clause
i. What is it?
1. Frees party from liability when an extraordinary event prevents party
from fulfilling contract obligations (i.e. act of God)
ii. For FM Clause to be used:
1. Party may NOT CAUSE the event, AND
2. Must take reasonable steps to PREVENT it.

9. REFORMATION (NOT an actual avoidance doctrine)

a. What is it?
i. Court is asked to rewrite the contract so that it represents the “true” agreement of
the parties.
ii. Potential remedy when contract tainted by avoidance doctrine.
b. Rules:
i. Burden on party seeking it to show strong, clear, convincing evidence.
1. Higher burden than an ordinary civil suit.
ii. Must be mutual mistake  NOT available for unilateral mistake
iii. Mistake must be one of fact rather than law.
iv. Parol evidence rule does NOT apply.

_____________________________________________________________________________________

ADDITIONAL NOTES:
Predominant Purpose Test: when you have both goods and service in the same (hybrid) transaction, do
you apply the common law or UCC? Ask yourself what is the predominant purpose of the transaction

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CRIMINAL LAW OUTLINE

Professor Patrick Corbett, Michaelmas Term 2009

SOURCES OF CRIMINAL LAW:

1. Common Law (very objective): Judge made law, originating mostly from English Law.
a. Elements
i. Actus Reus: The act that must be committed and/or the harm or result that must
occur in order to establish the existence of a crime
ii. Mens Rea: The mental state or the degree of moral blameworthiness that must
have existed concurrently with the actus reus in order to establish the existence of
a crime.
1. Usually proven by circumstantial evidence (the jury is not mind readers,
see Tennessee v. Hall for standard).
2. If a common law crime is written (codified into statute) w/o mention of
the mens rea element, the court will read the intent into the statute (see
Morissette v. United States, common law of larceny (intent to steal) in
statute of conversion).
a. Legislatures can specifically legislate intent out, but they must do
so expressly.
iii. Concurrence: the act and the intent must occur in a close proximity of time and
be present when the defendant acts.
iv. Causation: actus reus proximately causes the prohibited harm
2. Statutory Law: if a statute uses a common law term w/o defining it, the statute assumes the
common law definition. If statute codifies common law w/o element of mens rea, intent is read
into the statute
3. Model Penal Code = NOT LAW (very subjective): A set of model codes designed by the
American Law Institute to help guide courts by defining crimes and their elements.

TYPES OF CRIMES:
1. Felonies: Crimes punishable by death or more than one year in prison
2. Misdemeanors: Crimes punishable by fine and/or one year or less in jail
3. Malum in Se: Crimes that are bad “in-and-of-themselves” (common law crimes)
4. Malum Prohibitum: Crimes that are bad “because we say so” (mostly governed by statute, include
strict liability offenses)

PURPOSES OF THE CRIMINAL LAW: The general purpose of the criminal law is to maintain an
acceptable degree of social order by requiring adherence to certain commonly agreed upon standards of
conduct. We attempt to do this through various means. Among the more important ones are:
1. Specific Deterrence – punishment to specifically to deter an individual from breaking the law
in the future;
2. General Deterrence – punishment to generally deter other members of society from engaging
in similar behavior;
3. Incapacitation – physically or otherwise preventing individuals from perpetrating future
crimes (i.e. prison, the death penalty, etc.);
4. Retribution – giving an individual who has broken the law his or her “just desserts,” in part
because morally this is the right thing to do, and in part to limit vigilantism;
5. Rehabilitation – changing the behavior of those who have broken the law so that they will not
commit more crimes when they are released.

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THEORIES OF PUNISHMENT:
1. Retributivism/Deontological Reasoning (Immanuel Kant):
a. A convicted defendant is punished simply because he deserves it; “Just Desserts
Theory,” he is morally responsible.
b. Assigns punishment on a proportional basis so that higher severity crimes receive a
more severe punishment than less severe crimes
c. Distinguish between Jus Talionis: “Eye for an eye”
d. Problem: Does not account for convict’s criminal history
i. CASES: see Coker v. Georgia, the death penalty is disproportional to the
crime of rape, thus cruel and unusual punishment (8th Amendment)
2. Utilitarianism/Consequentialism (Jeremy Bentham):
a. A convicted defendant’s punishment is justifiable based on the benefit to society.
The benefit to society must outweigh the harm.
b. Punishment is based on the deterrence of future crime
i. Specific Deterrence: deter individual
ii. General Deterrence: deter society/community at large
c. Rehabilitation: treat, aid, and teach D skills to succeed in society, D won’t have to
turn to crime in the future.
d. Problem: Requires determination of punishment that looks to the future to see if the
end result will be best for society.
i. CASES: see Regina v. Dudley and Stephens, general deterrence to society
(sailors in particular) to not engage in similar actions, the cannibalism at sea.
_____________________________________________________________________________________

CRIMES OF HOMICIDE: The unlawful taking of a person’s life by another…Setting the chain of
events in motion is sufficient (see People v. Lewis, V, instead of waiting to bleed out, slashed his own
throat after being mortally wounded by D). Causation key = mens rea caused actus reus.

COMMON LAW CRIMES OF HOMICIDE:

A. Murder: the unlawful killing of another human being with malice aforethought
a. Definition/Elements of MALICE AFORETHOUGHT (only need one of these)
i. Intent to kill, OR
ii. Intent to inflict grievous (great) bodily harm [that resulted in death], OR
iii. Felony-Murder [killing during commission/attempted commission of a common
law felony], Felonies  Dressler 31.06(A), Malice inferred from the intent to
commit the underlying felony (arson, rape, burglary, robbery), OR
iv. Intentional creation (subjective knowing), or conscious disregard, of a VERY
HIGH risk of death or GBH (“depraved heart”, (see Banks v. State, shooting into
a moving train).
1. W/o justification, excuse or provocation

B. Manslaughter: the unlawful killing of another without malice expressed or implied

a. Voluntary Manslaughter: A killing that would otherwise be murder but that was
committed (deterrence has limited value)
i. Reasonable (legally adequate, objective) Provocation, AND
1. Incident would cause a reasonable person to react unreasonably.
2. List in Dressler 31.07, nowadays left to the jury to determine reasonable.
3. Words generally are not sufficient unless they are words that give
information to D, of something that is one the list, in which case
informative words are usually regarded as the same as seeing the event
occur (see State v. Grugin).

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ii. Heat of Passion: causal connection b/t provocation and offense.

1. Defining the reaction of a subjective person to an incident. It means the
person reacted in an agitated and emotional state to the incident.
2. A reasonable person would not have cooled off in the time between
provocation and the offense. Short window of time.
iii. Causation: Provocation, caused heat of passion, caused action.
b. Involuntary Manslaughter [Criminal (Gross) Negligence]: the unintended killing is
involuntary if…
i. (1) Awareness (reasonably foreseeable, objective standard) of (2) HIGH and
unreasonable risk of death, (3) D’s conduct was unreasonable (socially
unacceptable) and (4) a substantial departure from ordinary/prudent person
would act, OR
1. See People v. Rodriguez, fire in D’s house kills her kid, risk not
reasonably foreseeable (maybe not today). See State v. Hardie, D shoots
V w/gun intending only to frighten V, unreasonable conduct.
ii. Caused during the commission of an unlawful act that is not a felony, or that for
some other reason is insufficient to trigger the felony murder rule.
(Misdemeanor Manslaughter Rule, many jurisdictions refuse to apply/abolish)

STATUTORY (Penn./Cali. Model) DEGREES OF MURDER

1. First-Degree Murder: 1st degree is a statutory crime
a. Elements: See Commonwealth v. Drum and Tennessee v. Hall
i. Willful  Intent to kill, AND
ii. Deliberate  Purposeful (consideration of options), AND
iii. Premeditated  Reflection/Judgment/Planned Activity (“Second-Look”), OR
1. See People v. Perez, planning, motive, manner of killing can be
important, not required, to determine Deliberation and Premeditation.
Helpful in all States, not just California.
iv. Felony-Murder during commission/attempt of (BAARKS) enumerated felonies,
malice inferred from intent to commit the underlying the felony.
1. GENERAL LIMITATIONS
a. Michigan MINORITY Rule: Malice required, not inferred from
underlying felony, intent to kill, GBH, or depraved heart (see
People v. Aaron). Depraved heart sufficient for malice.
b. Merger/Independent Felony Doctrine: underlying felony must
be independent from the killing for felony murder. Many
murders are preceded by assaults (see People v. Ireland).
c. KILLING BY A NON-FELON, Agency Theory: criminal
culpability ordinarily shall not be imposed for lethal acts of non-
felons that are not committed in the furtherance of a common
design. MAJORITY RULE. (Minority Rule: Proximate Cause
Theory—would hold D reasonable for felony murder)
2. Second-Degree Murder: (similar to common law murder)
a. Elements
i. Intent to kill w/o premeditation/deliberation, OR
ii. Intent to cause great bodily harm, OR
iii. Subjective awareness of very high risk to human life = Wanton and willful
disregard of a known, unreasonable risk to human life (Depraved Heart) (see
Curry v. United States, and Edwards v. State of Tennessee).
iv. Felony-Murder during commission of non-BAARKS (inherently dangerous)
felonies

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3. Manslaughter (See Common Law) READ THE STATUTE

a. Voluntary: reasonable provocation and cooling of period left open for the jury to
determine.
b. Involuntary: (Gross Negligence or Culpable Negligence)
c. Misdemeanor Murder: (malum in se)

MODEL PENAL CODE HOMICIDE CRIMES: a person is guilty of criminal homicide is he purposely,
knowingly, recklessly or negligently cause the death of another human being.
1. Murder: §210.2
a. Elements
i. Purposefully, OR
1. The conscious object is to cause (engage in conduct) death
ii. Knowingly, OR
2. Actor is aware and practically certain conduct will cause death
iii. Recklessly
1. Conscious disregard a substantial and unjustifiable risk of death,
manifesting an extreme indifference to the value of human life, AND
2. A gross deviation from the standard of conduct that a law-abiding person
would observe in the actor’s situation
3. The Code also provides for felony-murder by setting forth that extreme
recklessness (and, thus, murder) is presumed of the homicide occurs
while D is engaged in, or is an accomplice in, the commission/attempted
commission, or flight from one of the dangerous felonies specified in
statute (robbery, arson, burglary, kidnapping, felonious escape, or rape)
2. Manslaughter: §210.3
b. Elements
i. Recklessly, OR
1. Conscious of a substantial and unjustifiable risk of death, not under
circumstances manifesting extreme indifference to human life.
2. Gross deviation from that of a law-abiding person in D’s situation
ii. Extreme Mental or Emotional Disturbance
1. Killing while under the influence of an extreme mental or emotional
disturbance (Subjective)
2. Reasonable explanation or excuse  Reasonable to a person in the
actor’s situation under the circumstances as he believed them to be.
(Objective/Subjective)
3. Negligent Homicide: §210.2
c. Unaware of a substantial and unjustifiable risk of death but a reasonable person would
have been so aware/should have known.
_____________________________________________________________________________________

RAPE AND CRIMINAL SEXUAL CONDUCT

ELEMENTS OF COMMON LAW RAPE:
1. The victim must be a woman (rape only when a woman is raped by a man)
2. Requires penetration of the vagina by the penis
3. Any penetration, however slight, is sufficient (completion of act not required)
4. No rape where the woman is married to the man, even if the two are separated, even if the man
uses a knife or gun to accomplish rape (this is known as the marital exemption)
5. By force (violent force) and against the woman’s will (no consent), actual physical force/threat of
serious bodily harm, more than that required for the penetration to overcome the resistance.

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6. The woman must physically resist the attacker, by crying out or otherwise expressing her
unwillingness to the act. Otherwise, she is considered as having consented to the act.
7. General Mens Rea  general intent offense, morally blameworthy state of mind that woman did
not consent
a. Possible Defense: Reasonable belief that woman consented

SPECIAL (Common Law) EVIDENTIARY ISSUES

1. Corroboration Requirement  not originally required by common law, but courts have added to
common law tradition. Actual physical evidence, witnesses, etc., or circumstantial evidence was
required to prove rape.
2. Cross-examination of the victim regarding sexual history and reputation for chastity  Common
Law allowed this.

STATUTORY RAPE: (originated upon statute of Parliament) involving the penetration of a female child
or young woman, under the age of consent, by a man (penetration same as in common law). The age of
consent is determined by statute. Even if consented to, sexual penetration of the minor violates the law.
(1) Consent/lack thereof  irrelevant, (2) Force/lack thereof  irrelevant. [Prosecutor only had to prove
penetration and under age of consent] [TREATED MUCH LIKE STRICT LIABILITY}
1. Mistake of Fact: the majority rule is that mistake of fact (age) is NOT a defense to statutory rape.

RAPE SHIELD LAW: Seeks to protect victims from being cross-examined about irrelevant, oftentimes
embarrassing, personal information. A court may hold a special “in camera” hearing to determine
whether the testimony is relevant and constitutionally required to be admitted  weight the inflammatory
or prejudicial nature and the probative value.

CONSENT: Affirmatively and freely–given consent/permission of the alleged victim

DISTINCTIONS BETWEEN COMMON LAW RAPE AND C.S.C. STATUTES:

(1) Under CSC, victim may be either woman or man
(2) CSC divides rape into two kinds; sexual penetration and sexual conduct.
(3) Sexual penetration includes: sexual intercourse, fellatio, cunnilingus, anal intercourse, or any
intrusion of any part of a person’s body or of any object into the genital/anal openings. CSC
respects the value of the individual of personal autonomy and choice.
(4) CSC laws do not ordinarily in themselves change the marital exemption.
(5) Michigan CSC  Resistance not at issue,
(6) New Jersey Sexual Assault  “physical force” is satisfied by penetration w/o consent (differs
from Common Law Rape)
(7) Pennsylvania Sexual Assault  “physical compulsion”, force greater than that inherent in the act
of sexual penetration (some level of violence) (based upon Common Law Rape)

CRIMINAL SEXUAL CONDUCT (CSC) STATUTES: if no intent, infer intent into statute
1. Sexual Penetration: penetration is used in the act, any type of penetration is sufficient (CSC 1, 3)
2. Sexual Contact: intimate parts of the victim are touched with the intention of using the touching
as a form of sexual gratification (CSC 2, 4).
3. For Exam Purposes: Statutes will be provided for exams
_____________________________________________________________________________________
ASSAULT (TWO TYPES) AND BATTERY
Battery Elements
1. Mens Rea
a. An intent to injure, or offend (General Intent), OR
b. The person must have acted with gross negligence regardless of intent

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2. Actus Reus
a. There must be a nonconsensual and unlawful
b. Harmful or offense contact
i. Offensive contact is usually judged by an objective (reasonable person) standard.
c. Caused by the defendant. An instrument may be used.
3. Simple Battery: no lasting physical injury
4. Aggravated Battery: significant injury

Assault Elements
1. First Type of Assault (Attempted Battery, all attempts crimes are specific intent)
a. Conduct by D, was unlawful
b. With intent to cause harmful or offensive contact (Specific Intent)
c. Present ability
d. Apprehension by the victim is NOT required
e. The attempt must come very close to completion (attempted battery)
2. Second (Frightening) Type of Assault: (Reasonable Apprehension)
a. The person intends to frighten another person, that is, to put that person in
apprehension of an immediate battery (Specific Intent)
b. The person does become apprehensive, that is, does become fearful of an immediate
battery, AND
c. The apprehension is a reasonable one for the victim to make under all of the
circumstances
OTHER ASSAULT CRIMES
1. (Felonious?) Assault: assault or A/B with gun, revolver, pistol, knife, iron bar, club, brass
knuckles, or other dangerous weapon w/o intent to murder or GBH.
2. Assault with Intent to GBH: assault or A/B with intent to do GBH less than murder.
3. Assault with Intent to Murder: assault or A/B with the intent to commit the crime of murder.
_____________________________________________________________________________________

KIDNAPPING
ELEMENTS
1. Forcible Movement Type
a. The victim is moved from one place to another (substantial inference),
b. This is done through force, fraud, deception or threats,
c. The movement is against the victim’s will or against a victim who is unable to give
lawful consent, AND
d. The movement is done without lawful authority
2. Secret Confinement Type
a. The victim is secretly confined or imprisoned
i. Duration: more than practical joke, substantial interference
b. This is done through force, fraud, deception or threats
c. The confinement or imprisonment is against the victim’s will or done against a victim
who is otherwise unable to give consent, AND
d. The confinement is done without lawful authority.
3. Mens Rea: (General Intent) determined by the language of the statute or as determine by a
construction given by the courts. In many jurisdictions motive or intent may be immaterial  D
knows V does not want confinement
4. Incidental Rule
a. If the movement is merely incidental to the commission of another crime, then it is not
kidnapping
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BURGLARY: a breaking and entering of a dwelling house of another at night with the intent to commit
a felony therein. (Offense against habitation)
COMMON LAW ELEMENTS
1. Actus Reus
a. Breaking: there must be any breaking  any force, no matter how slight, to create or
enlarge an opening to gain entry
i. Constructive Breaking: fraud or deception is equivalent to breaking for purposes
of common law burglary, or exceeding limited consent.
b. Entering: the entry of any instrument used to facilitate the commission of the felony
inside, or the entry of any part of the culprit’s body, no matter how slight, is a sufficient
entry
i. Exception: an instrument used for breaking which accidentally enters the
dwelling is NOT an entry (not to facilitate the commission of the felony)
c. Of a Dwelling House: a structure used for human habitation. Owner or person with right
to use the property need not be present.
i. Temporary Dwellings: like summer cottages, are considered dwellings.
ii. What is NOT a Dwelling: A new home with no one occupying it, an abandoned
home, a business building is not a dwelling.
iii. CURTILAGE: dwelling includes outbuildings (capable of human habitation) in
curtilage  the space surrounding a dwelling house that is within a fenced area
that surrounds a dwellings house, or within an area that might ordinarily be
expected to be fenced (an imaginary fence is sufficient). Thus, any breaking of a
building within the curtilage counts.
d. Of Another: A person cannot be convicted of breaking into a home which that person
either uses as a dwelling or has the right to use as a dwelling.
i. Inner-Door Doctrine: within a specific building, multiple people may have right
to possession of a specified area. Common use area: living room, cannot enter
into someone’s bedroom: Exclusive use.
e. In the Nighttime: after dusk but before dawn, a dwelling house is more vulnerable at
night.
2. Mens Rea (Specific Intent Crime)
a. With the Intent to Commit a Felony Therein: the breaking and entering must be done
with the intent to commit a particular felony. Neither the felony nor any act towards the
felony need be proven, as long as there is a breaking and entering and sufficient evidence
to prove the intent to commit a felony.
i. The intent must be formed before the entering, if no intent = trespassing. I.e.
Concurrence

HOME INVASION: any person who breaks and enters a dwelling with the intent to commit a felony or
a larceny therein, or the entry of dwelling without permission with intent to commit a felony or larceny
therein (home invasion accounts for the lack of “breaking” into dwelling)
1. First-Degree: home invasion when either (1) another person is lawfully present in the dwelling,
or (2) person is armed with a dangerous weapon.
2. Second-Degree: home invasion that is not in the first-degree
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ARSON: the malicious burning of the dwelling house of another

Elements
1. Actus Reus:
a. The structure must be a dwelling house of another
i. The burning of one’s own home is insufficient

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ii. If someone recklessly burns his own home, and the fire spreads to another
person’s house, the crime is arson if the arsonist recklessly disregarded a high
risk of burning will occur, the risk to another house.
iii. If a landlord burns his house while rented to another, it is arson since it is not his
dwelling house.
b. Some part of the dwelling house must be burned (or charred)
i. The burning does not have to be completely consume the premises or even cause
an open fire. Any charring or evidence of combustion of any part of the structure
is sufficient (something permanently attached to the house)
1. Smoke Damage is NOT sufficient
ii. The burning of clothing or other items inside the house, if it does not affect the
structure, is not sufficient for arson.
2. Mens Rea:
a. The defendant must have acted maliciously  intends to burn the dwelling of another or
if he acts under such circumstances that there is an obvious, plain and strong likelihood
that the fire started will result in the burning of the dwelling house, i.e., reckless
disregard (knowledge of the risk being taken).
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PROPERTY CRIMES
LARCENY (Specific Intent Crime)
Common Law Elements
1. The trespassory (lacking permission, lying, mistake) [no transfer of title, just possession]
2. Taking (obtaining possession)
a. Effective taking of property, interfering with other person’s rightful possession.
3. And carrying away (asportation)
4. Of personal property
5. In the possession of another
6. With the intent to steal (permanently deprive the possessor of) the property at time of the
trespassory taking/possession
a. If the intent was to borrow, joyriding = no larceny (see People v. Brown)
7. To convert the property to the use of someone other than the owner.

First Extension—Custody v. Possession: applies only for employee/employer, or master/servant

relationships where the property was given in order for it to be taken care of. In these situations, the
employee/servant has custody, but not possession of the property  larceny.
1. Once rightful possession is obtained, there can be no conviction for larceny if the person sells or
disposes of the property. Possession implies control of property; ability to use with sound
discretion (see Morgan v. Commonwealth)
2. Fraudulently obtaining property where the possessor transfers only possession, but not title, is
larceny (see Wilkinson v. State)
Second Extension—Larceny by Trick: there is no turning over of possession to the thief because the
person would not have done so if he had know of the thief’s true intentions.
HOWEVER, if there is no evidence that the person intended to steal the property at the time that
he took physical possession of the property, then he does obtain possession and there can be NO
crime of larceny (see King v. Pear). Fraud alone is NOT larceny, needs also the intent to deprive
permanently. In cases of larceny by trick, VICTIM EXPECTS TO GET PROPERTY BACK.

Third Extension—Intentionally Keeping Property Given by Mistake: rightful possession due to the fact
that the person did not know that they were given something by mistake until after the fact. One must
have knowledge at the time of taking of mistake (see Cooper v. Commonwealth).

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Continuing Trespass Doctrine: trespassory taking (possession by fraud), trespass continues until one
forms the intent to permanently deprive, at which time larceny committed (see State v. Coombs).

EMBEZZLEMENT
Common Law Elements
1. Conversion
a. Acts that seriously interferes with the owner’s rights and so constitutes a conversion
i. Examples: using it up, selling it, pledging it, giving it away, delivering it to one
not entitled to it, inflicting serious damage to it, claiming it against the owner,
unreasonably withholding possession of it from the owner.
ii. Not Conversion: slight damage, slight movement
2. Of personal property
3. Of another
4. The defendant receives lawful possession of property (not trespassory, like in larceny)
a. Possession of money or goods if one is “authorized to dispose of such money or goods at
his discretion.”
5. That person is in trust relationship as to that property
6. With the intent to use that property in a manner inconsistent with that position of trust (such as
with the intent to permanently deprive)

OBTAINING PROPERTY (or Money) BY FALSE PRETENSES

Common Law Elements
1. Obtaining title (ownership interest)
2. To personal property
3. Of another
4. By way of a knowing misrepresentation
5. Of a material (something that would induce the person to part with the property/part of the
decision process)
6. Existing fact (not about a future act/future promise/also not an opinion, i.e., “I’ll pay you
back…” or “you will really like this…”)
7. With the intent to defraud, to obtain title (ownership interest) to the property

VICTIM INTENDS TO GIVE TITLE, NO EXPECTATION FOR RETURN OF PROPERTY

Q: Does the victim have the ability to transfer title? Bank teller = YES

CONSOLIDATED (MODERN CRIME OF) “THEFT”: MPC combines all theft crimes into one for
charging purposes, then at trial can prosecute under different sections of the crime
THEFT is the offense which encompasses larceny/false pretenses/embezzlement.
MPC §223.1

ROBBERY (actus reus of larceny or attempted larceny  an aggravated form of larceny)

Common Law Elements
1. There is a trespassory taking and carrying away, OR
2. An attempt to take and carry away
3. The personal property
4. Of another
5. With the specific intent to permanently deprive the person of the property
a. Claim of Right Defense: Good Faith belief that property belongs to the defendant, maybe
no intent
PLUS TWO ELEMENTS…

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6. Taking of property must be done in victim’s presence or from victim’s person

a. Presence: proximity and control over property
7. Done by force or fear
a. Actual physical force or an immediate threat of physical force [pick-pocket insufficient]
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GENERAL PRINICIPLES
NECESSITY OF AN ACT: there must be an act that has occurred in order for it to be prosecuted. Every
crime needs an act. Even crimes in waiting, solicitation; situation created to set stage for future crime.

FAILURE TO ACT: failure to act in absence of other factors is not criminal, unless you have a legal
responsibility to act (satisfy/constitute the actus reus element).
1. Statute imposes a duty to care
2. Where one stands in a certain status relationship to another
i. Immediate family members, dependant care giving relationship
3. Where one has assumed a contractual duty to care for another
4. Where one has voluntary assumed the care of another and so secluded the helpless person as to
prevent others from rendering aid.
5. Creating peril (Example: hit and run).
Examples:
1. Parents have a legal duty, not just a moral obligation, to care for their children
a. No legal responsibility or guardianship after the child is an adult
2. Owner of an automobile, who knows that it is being operated contrary to the law, is said to have
given implied consent to that act, and is thus liable for the consequences.
3. Employer/Superior is not liable for unknown acts committed by his employee, unless committed
under order or direction of the employer/superior.
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INCHOATE (Imperfect/Incomplete) CRIMES

ATTEMPT CRIMES (ALL attempt crimes are specific intent) [Attempt merges with the offense]
Common Law Elements
1. Mere preparation is NOT enough to convict a D of an attempt
2. Instead, D must commit a sufficient over act beyond mere preparation to be guilty of an attempt
(ALL depends on the test you apply)
3. Specific intent to commit the crime
a. Example: Attempted Murder = must have Intent to Kill (cannot be proved under a
depraved heart or intent to GBH)

Dangerous Proximity Test: an act in order to be a criminal attempt, must be immediately, not
remotely, connected with and directly tending to the commission of an offense. The test says that the
defendant must have done everything he could have done to produce the given result. – or there is a
physical proximity and indispensable element (see Rizzo) “dangerously close to success” [Favors
Defendant, harder for the Prosecutor to prove]

MPC “Substantial Step” Test: defendant must have performed an act that strongly corroborates his
criminal purpose. “Purposely does or omits to do anything which, under the circumstances as he
believes them to be…Section 2: substantial step that is strongly corroborative of the actor’s criminal
purpose, examples of this section seem to be mere preparation.
1. Courts may adopt MPC, but employ their own version of what constitutes a substantial step.

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IMPOSSIBILITY AS AN AFFIRMATIVE DEFENSE ONLY FOR ATTEMTPS

1. Factual Impossibility: when a crime cannot be finalized because of some fact unknown to the
defendant; factual impossibility is NO defense to a crime.
2. Legal Impossibility: however hard the defendant may try to commit the crime, the elements of
the crime cannot be committed in the way that the defendant is attempting to commit the crime;
legal impossibility IS a defense to a crime. (No matter what your intent, if the law does not
prohibit what the person wants to complete, NOT criminal).
a. California “Policy Approach” Rule: the criminality of the attempt is not destroyed by the
fact that the goods, having been recovered by the police had, unknown to D, lost their
“stolen” status. (Most courts are applying this policy-based approach).
b. Oklahoma/New York “Jaffe” Rule: when goods have lost their character as stolen goods
at the time D purchased them, and that his criminal intent was insufficient to sustain a
conviction for an attempt to receive stolen property, knowing it to have been stolen.
3. Hybrid Legal Impossibility: does the fact go to a legal requirement or element? Yes, then there is
a defense to the act.

ABANDONMENT OF AN ATTEMPTED CRIME

1. Common Law: Once the criminal conduct has commenced, more than mere preparation,
abandonment is not ordinarily considered a common law defense to an attempt. [However, for
policy reasons some states now recognize abandonment as a defense, as long as no one has been
hurt or if the conduct did not involve serious danger to another.]
2. MPC: allows for voluntary renunciation/abandonment of an attempt crime as an affirmative
defense. Not renunciation if motivated by a decision to postpone the criminal conduct until a
more advantageous time or to transfer the….
3. Withdrawal: One may withdraw before the overt act is done and avoid criminal responsibility by
communicating the fact of his withdrawal in an unmistakable manner. [Cannot withdraw from
attempt?]

SOLICITATION (can merge into an attempted crime, conspiracy, or the crime solicited if completed)
1. The requesting, commanding, hiring, asking, or encouraging
2. Another person
3. To commit a crime
a. Must be specific about the crime solicited
4. With the specific intent that the other person commits the crime solicited, asked in such a way as
to order the crime to be committed.

MPC: (1) no limitation on crimes to be solicited, (2) if D fails to effectively communicate solicitation,
still guilty  conduct designed to effect such communication. (Ex. Email sent, but never read).

Once the crime is committed, the crime of solicitation merges with the crime  the person who
solicited the commission of the crime is guilty as an accessory to the crime and can be convicted of
the crime. Solicitation is a common law misdemeanor regardless of the grade of the offense solicited.

Withdrawal: persuade the person not to do the act, convince them not to do the act

CONSPIRACY (does NOT merge into other crimes under common law, merge does occur under MPC)
READ DRESSLER 29.07
1. An agreement (mutual understanding, writing NOT required)
2. Between two or more “criminal minds” persons (Plurality)
a. MPC: Unilateral agreement, Under Cover not a “criminal mind,” but under MPC, it
would still be a conspiracy (agree that one or more of them will engage in conduct).

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3. Joined together to accomplish some unlawful purpose, AND

4. An overt act of one ore more parties to effect the object of the conspiracy
a. The overt act need only be by one of the parties, and it need NOT be a crime
b. NOT an element of common law conspiracy
5. With the intent to agree AND intend that the object of their agreement is to be achieved

Co-conspirator need not know all of the other parties involved in the conspiracy; D must understand that
the plan or scheme is unlawful, and knowingly and intentionally joins that plan. Co-conspirators do not
need to know of every contingency of the agreement, but just that each co-conspirator knows the general
scope of the unlawful agreement and shares that general purpose (see Rosado-Ferandez and Kotteakos)

Pinkerton Rule: once a conspiracy is charged, each of the co-conspirators can be charged, convicted and
sentenced for the conspiracy. In addition, each of the co-conspirators can be convicted and sentenced for
each crime committed by a co-conspirator if such crime is reasonably foreseeable in furtherance of the
conspiracy to be a consequence of the criminal agreement. MPC rejects Pinkerton Liability

Withdrawal Under Common Law: affirmative step to withdraw that is reasonably likely to communicate
with the other members inconsistent with the purpose of the conspiracy relieves D from being charged
with substantive crimes (before those crimes are committed)
What is a affirmative step?

Withdrawal Under MPC: affirmative defense (after conspiring to commit a crime) thwart the success of
the conspiracy, under the circumstances manifesting a complete and voluntary renunciation of his
criminal purpose
What constitutes “thwarting”?

ACCOMPLICE LIABILITY (Aiding and Abetting): like attempt, it is not a “separate crime”
1. Common Law: WILL NOT BE TESTED ON FOR THE EXAM???
a. Principal in the First Degree: the person who actually commits the crime
b. Principal in the Second Degree: someone who is present and who assists in the
commission of the crime
i. Under Common Law, both kinds of principals had to specifically intend the
commission of the crime
c. Accessory Before the Fact: someone who planned or otherwise assisted in a crime but
ho was not present (or constructively present) at the commission of the crime.
i. Under Common Law, limited death penalty only to principals and does NOT
extend to accessories.
d. Accessory After the Fact: someone who assists a felon after the crime has been
committed.
i. Under Common Law, punished as any accessory (no distinction b/t time)
ii. Under Statute, accessory after the fact is less culpable than the offender or
someone who has assisted in the commission of the crime.
1. Accessory after the fact must have had knowledge that the felon he
assisted had committed the crime in order to be guilty.
2. Modern Classification USE FOR EXAM PURPOSES UNLESS TOLD OTHERWISE
a. “Principal” (and “aider and abettor”) Today = CL Principal in
First/Second/Accessory Before the Fact…
b. “Accessory After the Fact” = common law accessory after the fact
i. 18 U.S.C. §3: pg. 244
3. Accomplice Liability ELEMENTS (Statutes):
a. First, some crime has been committed

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b. Actus Reus: the giving of any aid (physical/psychological) (see above in 2(b)(i))
assisting the perpetration of a particular crime (there is no general crime of “aiding and
abetting”)
i. Failing to act when you have a legal duty to act = assist
c. Mens Rea: with the purpose of promoting or facilitating the commission of the offense
[MPC 2.06(3)(a)]
i. Common Law Mens Rea: the person rendering the aid had the specific intent or
purpose of either committing or of encouraging or facilitating commission of the
offense charged at the time of giving aid or assistance.
4. Charging/Prosecution/Conviction/Sentencing
a. A prosecutor does NOT have to distinguish between the person who commits the crime
(principal) and an accessory to the crime. BOTH are charged simply with the
commission of the crime
b. Unlike conspiracy (where an agreement is required), the accomplice (where no
agreement is required) is charged only with the crime committed and if convicted,
punished only for that crime.
5. Examples:
i. D1 rapes a waitress in a crowded bar
1. Guilty of Rape
ii. D2, his friend, sees him having trouble and helps hold the V down
1. Guilty of Rape (Accessory During the Fact)
a. Obviously intended the rape to continue
b. Acted to assist in the perpetration of the crime
iii. D3, doesn’t know any of the parties, but cheers them on
1. Guilty of Rape (Accessory During the Fact)
a. Intended that they continue
b. Acted by encouraging (psychological assistance) them to
continue
iv. D4, another customer, is enjoying the “show,” but stays silent
1. Not Guilty
a. Intended that they continue
b. No Overt Act
v. D5, drunk standing outside, unaware of what’s happening. When a Police
Officer walks by, hears the commotion, and asks him what is going on, he
replies, “nothing.” The police officer believes him and continues down the
street.
1. Not Guilty
a. No Intent
b. Acted by assisting in avoiding detection by the Police
vi. D6, the bartender/manager, does nothing, and says nothing. Statute requires him
to control rowdy patrons.
1. Not Clear
a. Intent is Not Clear (Did he want them to continue, or was he
afraid to intervene?)
b. Legal Duty, acted by failing to act when required to do so
vii. D7, bar owner, was at home.
1. Probably Not Guilty
a. No Intent (Unless he knew about it beforehand)
b. No Overt Act (Unless he knew about it before hand, and staying
away was an act)

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viii. D8 arrived after the crime, was informed of the crime, and then drove the
perpetrators to Canada.
1. Guilty as an Accomplice After the Fact to Rape
a. Knew that they had committed the crime
b. Assisted them in evading capture and prosecution
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VARIOUS MENS REA ISSUES
CONCURRENCE BETWEEN ACTUS REUS AND MENS REA—see notes on pg. 1 of this outline.
LEGAL REQUIREMENT FOR PROSECUTION…but,
1. Public Policy may require that this doctrine be ignored (rules should not be applied in a social
vacuum)

STRICT LIABILITY CRIMES:

1. Characteristics
a. NO MENS REA
i. Statute should state clearly that no mens rea is required. If it does not, the intent
will most likely be read into the statute (see Morissette)
ii. Absolute power of the legislature to make malum prohibitum crimes with strict
liability, where the only restrictions are constitutional restrictions.
1. What constitutional restrictions? Court does not say.
2. IS OFFENSE STRICT LIABILITY? LOOK TO:
a. Statutory language—look for any “intent” language
b. Malum in se v. Malum prohibitum offense
c. High Stigma, High Penalty = probably requires mens rea.
d. Historical Treatment
e. Legislative history and legislative intent
f. Standard imposed “reasonable and adherence thereto properly
expected of a person?”

TRANSFERRED INTENT: the common law, as well as current law does not allow for new crimes to be
created by combining the mens rea of one crime with the actus reus of another. Some crimes are,
however, a blend of two crimes (there already exist crimes which are composed of the elements of two
different crimes).
1. Intent follows the act
2. Count your victims
a. Example: A shoots at B (with intent to kill), misses and kills C
i. Intent to shoot B transfers to C
ii. Guilty of Murder
1. Attempted Murder of B merges with the Murder of C
2. Guilty of Assault (with intent to murder/kill) on A
3. MENTAL STATE WAS THE SAME, apples and apples
b. Non-Example: A wants to steal (larceny) property, accidentally sets fire to property.
i. A is not Guilty of arson, because he did not intentionally/maliciously burn the
property
ii. A is not Guilty of larceny, not taking of the property.
iii. Apples and Oranges
MOTIVE: an internal state which cause a person to act (NOT the same as intent or mens rea). It is rather
the precedent or previously existing or co-existing conditions which draw one into action. Motive is not
usually an element of a crime although the legislature is given great discretion to determine the elements
of any criminal provision. Motive can help/assist in determining a person’s intention.
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ISSUES CONCERNING MENTAL ILLNESS/DISEASE/DEFECT

COMPETENCY TO STAND TRIAL: a defendant may not be put to trial unless he has sufficient present
ability to consult with his lawyer with a reasonable degree of rational understanding and a rational as well
as factual understanding of the proceedings against him.

INSANITY: generally, the kind and degree of mental abnormality that we as a society believe is
sufficiently severe that D should not be held criminal responsible for his acts.
1. Not Guilty by Reason of Insanity (NGRI): When defendant has been given an insanity
judgment the courts are able to confine him to a mental hospital until either he has regained sanity
or is no longer a danger to society or himself. At times he may be incarcerated for a longer period
of time in a hospital than he would have been if was convicted.
a. M’Naghten (“Right-Wrong”) Standard: a cognitive standard, at the time of committing
the act, the defendant suffered from mental disease or defect…
i. He didn’t know the nature and quality of his acts, OR
ii. D appreciated actions but didn’t know what he did was wrong.
b. Irresistible Impulse/Volitional Test: Due to mental illness defendant is unable to control
his actions or conform his conduct to the law (additional prong, not an individual/stand-
alone test) [Lacked Free Will]
c. MPC/ALI Standard: two-prong test, either has to be the “result of mental illness”
i. Whether D at the time of the crime was “substantially unable” to “appreciate the
wrongfulness of his conduct” (basically the M’Naghten Rule, but less stringent),
OR
ii. Whether D was “substantially unable to conform his conduct to the requirements
of the law”; i.e. understand that his action was wrong, but unable to control his
actions (basically the Irresistible Impulse Rule).
1. Must emanate from a mental illness or defect (not just repeated criminal
or anti-social behavior)
d. The Durham/Product Test: D in a criminal case is not responsible if his unlawful act was
the product of a mental disease or mental defect [“But-for” test, difficult to establish the
causal link between disease/defect and action]
i. Mental Disease: capable of improving or deteriorating.
ii. Mental Defect: not considered capable of either improving or deteriorating and
which may be either congenital, result of injury, or residual effect of a physical or
mental disease.
iii. Extension of Rule  Campbell Case: D could be found NGRI if his motivation
was the result of such mental disease, regardless of whether or not the sanctions
of the criminal law as a deterrent
iv. MAYBE MULTIPLE CHOICE/ WILL NOT BE AN ESSAY
e. Insanity Defense Reform Act of 1984: emerged after the attempted assassination of
President Ronald Reagan.
i. Limited to whether D was “unable to appreciate the nature and quality or the
wrongfulness of his acts” at the time of offense), i.e. NO volitional prong (easier
than M’Naghten rule, but no irresistible impulse component)
1. Burden of D to prove insanity by clear and convincing evidence
2. Limits expert witness testimony to only right-wrong analysis, no
opinions on ultimate issue of the accused’s sanity.
f. Burden of Proof: who must prove insanity or sanity, and by what standard of proof?
i. Federal: according to the Insanity Defense Reform Act of 1984, burden on D to
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1. Limits expert witness testimony to only right-wrong analysis, no

opinions on ultimate issue of the accused’s sanity.
ii. State:
1. Minority (?): burden on P to prove sanity beyond a reasonable doubt.
2. Majority (?): burden on D to prove insanity by a preponderance of the
evidence.
3. Oregon: burden on D to prove insanity beyond a reasonable doubt
4. ABOLISHED as a defense in a few states
2. Guilty but Mentally Ill (GBMI): This is NOT a defense, but a verdict choice. The defendant is
found guilty but not sentenced to a longer term than that of a mentally ill prisoner (even if
rehabilitated, D must still serve the remainder of sentence, or parole). Mental illness is a medical
decision, whereas insanity is a legal defense of non-responsibility that yields a verdict of “not
guilty by reason of insanity.”
a. If the trier-of-fact finds
i. D committed a crime
ii. D is mentally ill at the time of the crime, BUT
iii. D was not criminally insane.
b. Then D is guilty but mentally ill.
3. Diminished Capacity/Responsibility: One of diminished capacity can still be liable for crimes
that require a lesser mens rea, i.e. negligence.
a. Common Law: mitigates defendants who are not insane but still lack the mental capacity
to be held liable for their actions, due to their inability to form the required mens rea,
only to specific intent. The existence of some metal disease or defect that falls short of
legal insanity, but which negates the existence of the specific intent necessary for the
crime.
b. MPC: diminished capacity allowed to be raised to all offenses, whenever it is relevant to
prove that D did or did not have the state of mind

INTOXICATION: general rule, voluntary intoxication is not a defense to a crime. Involuntary

intoxication can be used as a defense.
1. Voluntary Intoxication: person must have knowingly ingested the substance, the tendency of
which to cause intoxication he knows or ought to know.
a. Intoxication, an artificially induced state of mind resulting from the voluntary ingestion
of alcohol or drugs or both.
b. When it IS a defense: to mitigate a specific-intent crime to a lower crime
i. Specific Intent: a special mental element that is required above and beyond any
mental state required with respect to the actus reus of the crime.
ii. Insanity: if D does not appreciate the nature of his actions, but the condition of
D’s mind is caused by his voluntary use of drugs or alcohol, insanity defense is
NOT available.
1. Alcoholism: condition that results in permanent damage to the brain,
might avail itself of a defense, but still up the to jury.
c. When it is NOT a defense: when D does not appreciate nature of conduct, but that was
caused by the voluntary intoxication.
d. Voluntary Intoxication Defense is NOT a fundamental principle of criminal justice,
allowing states to abolish the defense.
2. Involuntary Intoxication: many jurisdiction treat this the same as insanity
a. MPC: intoxication which (1) is not self-induced, OR (2) is pathological, is an affirmative
defense if by reason of such intoxication the actor at the time of his conduct lacks
substantial capacity either to appreciate its criminality [wrongfulness] or to conform his
conduct to the requirements of law.

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MISTAKE/IGNORANCE OF LAW/FACT
Mistake of Law: the general rule is that mistake or ignorance of law is no excuse (is not a defense)
1. Exceptions (see Dressler)
a. Fair Notice:
i. Engrained is our concept of Due Process is the requirement of notice. Notice is
sometimes essential so that the citizen has the chance to defend the charges
1. Whether D had actual knowledge of law, or showing of probability of
such knowledge
b. Reasonable-Reliance Doctrine:
i. Reliance of interpretation of statute or law officially made by body legally
charged with enforcing or interpreting such statute of law.
ii. D’s own misreading of law—even if in good faith—not included as a basis for
mistake of law defense
2. Failure of Proof Claims
a. D claims that because of a mistake of law, he did not have requisite mens rea
i. When the statute requires proof of knowledge of the law/element, knowledge of
which is required for violation
1. Failure to show that knowledge = no mens rea
a. Examples: statutes including “willful” language (i.e. specific
intent), knowledge of law and conscious violation of law.
i. “Voluntary, intentional violation of a known legal duty”
(see Cheek v. US).
b. “A different law” mistake

Mistake of Fact: may be a defense to negate the mental element of the crime,
1. Rules vary depending on whether the offense is
a. Specific Intent – honest/good faith/bona fide belief (does not have to be reasonable)
b. General Intent—honest and reasonable mistake
c. Strict Liability –mistake of fact is NOT available as a defense
_____________________________________________________________________________________

CONSENT:
1. General Rule, victim’s consent does not necessarily provide a defense to D.
a. However, may be relevant for professional sports and crimes that require they be
committed against the will/consent of the victim.
2. Consent cannot be considered a defense in situations where a duel is fought, playing Russian
roulette or to kill another in a mutual suicide pact.

Assisted suicide: legal in Oregon as well as a few other countries. It requires the consent of a person who
is suffering and near death, and wishes to have their life terminated. It is illegal in most states.

CONDONATION BY THE VICTIM: a common law precept that prohibits the private settlement of
criminal cases. Conduct of the victim does not extinguish criminality.
_____________________________________________________________________________________

DURESS/COMPULSION: duress is a defense to every crime except murder. Duress justifies illegal
conduct if the elements are met. Duress occurs when a person coerces another person to commit a crime.
The duress defense may be used when the following circumstances occur (may be b/t two equal evils)
1. There is a threat of immediate infliction, upon the defendant, of death or bodily harm; AND

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2. The Δ has a well-grounded fear that the threat will be carried out; AND
3. The Δ lacks a reasonable opportunity to otherwise avert the threatened harm.
Sometimes courts mention additional elements of the duress defense
1. The situations must have arisen without the fault of negligence of the Δ;
2. The threat must be present, imminent and impending when the crime committed under duress
is carried out.
Prison Escape Cases Additional Elements:
1. Was there time to complain to the authorities or to the courts?
2. Did Δ immediately report to the proper authorities when he or she had attainted a position of
safety from the immediate threat? (U.S. v Haney)

Class Elements: USE FOR EXAM PURPOSES (Human Force, like threats)
1. Threat to kill or seriously injure unless person commits offense
2. Person reasonably believed threat is genuine
3. Threat present and imminent
4. No reasonable escape alternative
5. Clean hands (i.e. did not substantially contribute to the creation of the emergency)

3rd Person Protection: is recognizable when the Δ is protecting a child or other family member or another
person who is used to coerce the Δ into action instead of threatening the Δ directly. The Haney case
establishes the defense as applicable to a third person when D acted so as to preserve the life of the third
person.

MPC on Duress §2.09: affirmative defense if coerced to do so by the use of, or threat to use, unlawful
force against his person or the person of another.
• Unavailable if the actor recklessly or negligently placed himself in the situation.
• Unavailable for woman acting under the command of her husband.

NECESSITY (“Choice of Evils” Defense): the necessity defense is also called the choice of evils
defense. The defense of necessity is used when physical/natural forces beyond the defendant’s control
cause the danger. “Necessity” justifies illegal conduct if the elements are met. With origins in common
law, the elements of necessity are set out in the Toops case…

Class Elements:
1. Imminent danger (significant evil)
2. No adequate alternative
3. Harm caused not disproportionate to harm avoided (lesser of 2 evils)
4. Good faith belief that action was necessary (to prevent greater harm)
5. Belief objectively reasonable (under all the circumstances)
6. Clean hands (i.e. did not substantially contribute to the creation of the emergency)

Additional Notes:
• Civil disobedience is NOT a necessity defense

MPC on Necessity §3.02: May be a defense to murder

Necessity allowed if…
1. Harm avoided is greater than the harm done (balancing), AND
2. Neither the Code nor other law defining the offenses provides exceptions or defense dealing w/the
specific situation involved (statute), AND
3. Legislative purpose to exclude the justification claimed does NOT otherwise plainly appear.

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IMPERFECT PRIVILEGE DOCTRINE: when D cannot quite prove one element of the crime/defense,
lessen the crime to a lower crime to give D a break.
_____________________________________________________________________________________

JUSTIFICATION DEFENSES
POLICE OFFICERS AND OTHER STATE ACTORS
1. Crime Prevention
a. The right of police officer to prevent or stop criminal activity
b. The right of a private citizens to prevent or stop criminal activity
2. Deadly Force—force that is (reasonably) likely to cause death or serious bodily harm.
3. Non-Deadly Force—force that is not (reasonably) likely to cause death. It does not become
deadly force even if someone dies as a result of it.

Common Law: almost unlimited authority for either police or private citizen to use deadly force in
pursuit of crime prevention (probably b/c felonies in common law carried a punishment of death)

LIMITATIONS (CONSTITUTIONAL) ON POLICE OFFICERS: Tennessee v. Garner, 471 US 1 (1985)

Deadly force may not be used in apprehending a fleeing felon unless it is…
1. To prevent the escape [of the suspect], AND
2. The officer has probable cause (reasonable belief) to believe that the suspect poses a significant
threat of death or serious physical injury to the officer or others.
3. NEVER APPLICABLE for suspect of misdemeanor, must be a felony that rises to the standard
under Tennessee v. Garner.

LIMITATIONS ON PRIVATE CITIZENS

1. Defense of Person—where the character and manner of the offense does not reasonably create a
fear of great bodily harm, there is no cause for exaction of human life or for the use of deadly
force.
2. Crime Prevention—justified in using deadly force to prevent the commission of a felony which
is either an atrocious crime or one attempted to be committed by force (or surprise) such as
murder, arson, burglary, rape, kidnapping, sodomy or the like (Commonwealth v. Emmons)
3. Apprehension (Citizen Arrest)—justifiable homicide in apprehending a feeling felon, D must
show at a minimum that…(State v. Barr)
a. The overt elements of felony were in fact present/Felony actually occurred (unlike
probable cause for police), and
b. The taking of life was, or appeared to be reasonably necessary in order to apprehend the
fleeing felon.
c. Must also show that the felony is “one which reasonably creates a fear of great bodily
injury”

DEFENSES OF HABITATION AND PROPERTY: the concept of a person’s habitation as one’s “castle”
runs throughout the law and the privilege of defending the habitation must not be confused with the
privilege of defending property which stands upon a much lower level.
1. Habitation—extends beyond actually residence, but the occupation as a substitute home or
habitation, like a hotel/motel, or even as a guest in the home of another (right to peaceful
occupancy within domicile) [Deadly force for burglary???]
a. Deadly Force—when D reasonably believes that the entry is attempted or made for the
purpose of assaulting or offering personal violence to any person, dwelling, or being
therein (State v. Mitcheson).
b. Look at statutes for subtle variations

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2. Personal Property (Majority Rule)—a private citizen cannot use deadly force in defense of only
personal property (see Commonwealth v. Emmons).
a. Trap-Guns: are unlawful when person not actually present (People v. Ceballos).

_____________________________________________________________________________________

TOTAL DEFENSES
SELF-DEFENSE
Elements:
1. At the time of the crime, D must have a honest belief that he was in danger of death or serious
bodily harm; [Subjective Standard]
2. The belief at the time must have been that this harm was imminent and immediate; AND
3. A reasonable person (in D’s circumstances) would have believed himself to be in imminent
danger of death or serious bodily harm at the time of the killing [Objective Standard]

Retreat Jurisdictions—some jurisdictions require that D must have been able to retreat in complete safety
and know at the time of the attack that D could retreat in complete safety.
• Castle Exception: do not require retreat if D is attacked in her own home by either a stranger or
co-inhabitant [has been extended to include D’s curtilage and place of business]
• Majority View: no duty to retreat

When D is Initial Aggressor w/Non-deadly Force, or Non-aggressor—D may respond with deadly force
if the above elements have been met.

When D is the Unjustified Aggressor w/ Deadly Force—when D assaults another with deadly force, and
the person threatened responds with deadly force, D cannot use the defense of self-defense if D kills his
attacker…
• UNLESS D withdraws from the fight in good faith and clearly informed the other person of
desire to end fight. If the other person continues assault or resumes at a later time, D may use
deadly force if the above elements are met.

Proportionality—was the use necessary and proportional for protection (i.e. not excessive)

DEFENSE OF OTHERS
Modern Elements—D may defend another (including strangers) with deadly force if…
1. D reasonably believes that the other person to be in immediate danger of death or serious bodily
harm; AND
2. D didn’t know that person may have lost the right of self-defense (allows for reasonable mistake)

BATTERED WOMEN’S SYNDROME DEFENSE

Basically the same elements of self-defense, but to allow expert witness testimony to address the
mental/emotional characteristics, “imminent” danger (the reasonableness of D’s perception of danger).
• “Non-confrontational Homicide”—When a battered woman kills her during a lull in violence
(sleeping spouse)  no imminent danger/killing is not reasonably necessary.
i. Cannot use self-defense, but go for imperfect privilege
• “Confrontational Homicide”—battered woman kills partner during a battering incident
i. Can use self defense
IMPERFECT PRIVILEGE: if the jury finds that D actually/honestly believed he was in imminent
danger, but that belief is not reasonable, than mitigate crime to lesser offense (murder  manslaughter)
_____________________________________________________________________________________

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ENTRAPMENT:
1. Subjective Standard—used by most states, in federal courts, as well as US Supreme Court
a. Government induces crime (i.e. creates a special incentive for D to commit the crime)
b. D was predisposed to commit the crime before government inducement (i.e. D’s
willingness to commit the offense prior to contact with government)
i. Examples:
c. Burden of Proof
i. On D to show inducement, if met then…
ii. On P to show predisposition
2. Objective Standard—minority view, used in California (see People v. Barraza)
a. Looks solely at police misconduct/inducement (i.e. were the actions of the police so
outrageous as to cause or incite an average hypothetical citizen to commit the offense)
i. Overbearing conduct (more than just simple lies)
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CRIMINAL PROCEDURE OUTLINE

Professor Patrick Corbett, Michaelmas Term 2010

SCOPE OF FEDERAL CONTROL OVER STATE CRIMINAL PROCEDURE

1. Article 3 Section 1—“The judicial Power of the United States, shall be vested in one Supreme
Court, and in such inferior Courts as the Congress may from time to time ordain and establish.”
a. Thus, the U.S. Supreme Court has the power to review federal court prosecutions. They
have direct supervisory authority over the lower federal courts, see McNabb v. United
States.
i. But cannot exercise supervisory authority over state decisions (?).
2. Article 3 Section 2—“The judicial Power shall extend to all Cases, in law and Equity, arising
under this Constitution….”
a. The judicial power also extends to all cases that arise under the Constitution. The court
will determine whether or not the case falls under the Constitution. See United States v.
Payner (the supervisory power does not authorize a federal court to exclude evidence that
does not violate the defendant’s 4th Amendment rights).
3. 14th Amendment Due Process—“Nor shall any state deprive any person of life, liberty, or
property, without due process of law.”
a. Incorporation Theories: To what extent is the Federal Constitution binding on the
states?
i. There are 3 types of incorporation theories:
1. Total Incorporation—theory states that all federal rights must be applied
to the states
a. Never saw a majority of justices.
2. Fundamental Rights:
a. The justices will look at each right individually and decide if the
right is necessary to the provisions of justice.
i. If the answer is yes, if the right is fundamentally
necessary, the right applies to the states.
ii. Over time, most rights have been incorporated (99%).
iii. Except:
1. 8th Amendment
a. Cruel and unusual punishment.
th
2. 5 Amendment
a. Grand jury proceedings.
3. Selective Incorporation
4. Separate, Adequate, and Independent State Grounds—May the states provide a defendant
with more protection than the federal constitution? YES
a. The constitution only provides the minimum level of protection for defendants. The
constitution only sets the floor; the states are free to set the ceiling. See Michigan v. Long
(if the Michigan Supreme Court wished to provide the defendant with greater protection
than that required by the federal Constitution, they should have made it clear that they
were resting their ruling on independent state grounds. Otherwise, it will be assumed that
the lower court ruled the way it did because federal law compelled the result).

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FOURTH AMENDMENT—“The right of the people to be secure in their persons, houses, papers, and
effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but
upon probable cause, supported by Oath or affirmation, and particularly describing the place to be
searched, and the persons or things to be seized.”
SEIZURES
1. Four General Types of Contacts—and burdens of proof
a. “Consensual” Contact—does not implicate the Fourth Amendment
b. Brief (Terry) Stop—requires reasonable suspicion
c. Full Blown Arrest/Search—requires probable cause and warrant or warrant exception
d. Administrative/Special Needs Seizure—must be “reasonable”
2. At What Point Does a Seizure Occur? A seizure is a point is time, not a continuing process.
a. Factual Application:
i. A seizure occurs when a police officer accosts/uses physical force against an
individual or exhibits a show of authority submitted to by the suspect, either of
which restrains his freedom to walk away (see Terry v. Ohio; California v.
Hodari D.).
ii. A seizure occurs if a reasonable (presumed innocent) person would not feel free
to decline the officer’s request or otherwise terminate the encounter (see Florida
v. Bostick).
1. When an individual voluntarily places himself in confined quarters,
restricted movement argument is not successful.
2. No seizure where there is no application of force, no intimidating
movement, no overwhelming show of force, no brandishing of weapons,
no blocking of exits, no threat, no command, not even an authoritative
tone of voice (see United States v. Drayton).
b. Totality of the Circumstances—judgment of the case will not be based on only one
element of the situation. Judgment must be based on the totality of the circumstances
[Write this on the EXAM]
3. Seizures Short of an Arrest
a. “Stop-and-Frisk” (See Terry v. Ohio)
i. Reasonable Suspicion Burden of Proof—the officer must have specific and
articulable facts, which taken together with the rational inference from those
facts, reasonably warrant the intrusion.
ii. TERRY BALANCING TEST —for each type of intrusion, the court must weigh the
governmental interest against the degree of the intrusion.
1. Government Interest—(justifies the intrusion at is inception, i.e. crime
prevention, officer safety, etc.). Must have reasonable suspicion…
a. To support the stop, there must be reasonable suspicion that
crime is afoot.
b. To support the frisk, the office must also have specific and
articulable facts that the suspect is armed and dangerous.
2. Degree of Intrusion—every amount of the intrusion must be related to
the government interest.
a. The intrusion is permissible if it is limited in scope to one
reasonably designed to recover weapons.
b. What Factual Situations Will Provide an Officer with Reasonable Suspicion?
i. United States v. Cortez (Terry reasonableness/totality of the circumstances)—the
reasonableness of the Terry standard must be based on the totality of the

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circumstances. The detaining officers must have a particularized and objective

basis for suspecting the particular person stopped of criminal activity.
1. Includes objective observations of police officer, information from police
reports, profiling (modes and patterns of operation).
ii. United States v. Sokolow (profiling)—a suspect matching the description of drug
courier profile will be sufficient to constitute reasonable suspicion.
1. What about racial profiling?
a. MAJORITY RULE —race may not be used in profiling unless race
is part of a specific description.
b. BORDER PATROL & CUSTOMS RULE —race connected with
other factors will demand heightened scrutiny.
iii. Sibron v. New York (mere presence around drug users)—the inference that person
who converse with narcotics addicts are engaged in criminal activity is simply
not the sort of reasonable inference required to support an intrusion by the police
upon an individual’s personal security (companion case to Terry).
iv. Adams v. Williams (know/reliable informant)—officer had ample reason to fear
for his own safety upon being told by an informant that defendant, seated in a
nearby car, was carrying narcotics and had a gun around his waist.
v. Illinois v. Wardlow (presence AND unprovoked flight)—presence alone is not
enough, but factors like unprovoked flight and other nervous behavior in a high
crime area may be sufficient to establish reasonable suspicion to detain
individuals to resolve any ambiguity.
4. Permissible Scope of a Temporary Seizure
a. “Plain Touch/Plain Feel”—once an officer is satisfied that the object in a suspect’s
pocket is not a weapon, the officer may not continue the tactile examination/manipulation
of it is an effort to ascertain whether it is otherwise incriminating. Only if the officer can
determine immediately on “plain touch/plain feel” that the object is a weapon/drugs will
there exist probable cause to search person further (see Minnesota v. Dickerson).
b. Stop to Investigate Past Criminal Activity—where is there already reasonable
suspicion that suspect committed crime, when the police have been unable to locate a
suspect in a past crime, that ability of the police to briefly stop that person to check I.D.
and ask question in the absence of probable cause promotes a strong governmental
interest in solving crimes and bringing offenders to justice (see United States v. Hensley).
c. Suspect is Dangerous and May Gain Immediate Control of Weapons—based on
reasonable suspicion that the car contains a weapon that the defendant has immediate
access to; the officer may check any area where weapons could be found. The scope of
Long restricts the search to the passenger compartment (see Michigan v. Long).
d. Protective Sweep of Home Post-Arrest—incident to arrest, officers may, without
reasonable suspicion or probable cause, look in places immediately adjacent to the scene
of arrest where a hidden person could launch an attack. The only thing that justifies a
protective sweep of the entire home is the reasonable suspicion that the home harbors an
individual who is a danger to the officers or others (see Maryland v. Buie).
e. Removal of Drive/Passenger From Vehicle—during a traffic stop, officers do not need
reasonable suspicion to have the driver or passenger exit the vehicle (see Pennsylvania v.
Mimms and Maryland v. Wilson).
f. Time Constraints on Terry—a Terry-type search must occur within an unduly intrusive
period of time (see United States v. Sharpe).
i. In this situation, examine whether the police diligently pursued the least intrusive
means to confirm or dispel their suspicions quickly, during which time it was
necessary to detain the defendant.

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g. Identification of the Suspect—it is not a violation of the 4th Amendment to require a

suspect to identify himself during the course of a valid Terry stop (see Hiibel v. Sixth
Judicial District Court).
h. Prolonged Traffic Stop/Seizure—a seizure that is justified solely by the interest in
issuing a warning ticket to the driver can become unlawful it is prolonged beyond the
time reasonably required to complete that mission (see Illinois v. Caballes, case involving
dog sniff).
i. Permissible Extent of a Temporary Seizure (Traffic Stop)—the 4th Amendment does
not require that a lawfully seized person be advised that he is “free to go” before his
consent to a car search is recognized as voluntary (see Ohio v. Robinette).
j. Frisk of Vehicle Driver/Passengers (During Traffic Stop)—traffic violation =
reasonable suspicion for temporary seizure. To justify a patdown of the driver or a
passenger during a traffic stop, police must harbor reasonable suspicion that the person
subjected to the frisk is armed and dangerous (see Arizona v. Johnson, pursuant to the
holding in Brendlin v. California, passengers in vehicle seized during traffic stop).
k. Detainment of Occupants—the police do not need a particularized suspicion to detain
an occupant of the home in which they are conducting an authorized search via warrant.
They get to detain anyone they can reasonably conclude is an occupant of the home (see
Michigan v. Summers).
i. What about visitors?
l. Use of Handcuffs to Detain Occupants—in inherently dangerous situations, the use of
handcuffs minimizes the risk of harm to both the officers and the occupants (see Muehler
v. Mena).
i. This rule is evaluated in the context of what the search warrant is looking for (i.e.
deadly weapons = handcuffs).
m. Frisk/Search of Person on Premises/Public Places—persons who are found in pubic
places cannot be frisked/searched without additional suspicion even if there is a lawful
search of the premises. Additional intrusion will not be allowed (see Ybarra v. Illinois).
i. What about the frisk of a detained person unrelated to purpose of search warrant
in the home, not public place?
5. Arrests and the Equivalent
a. Arrest by Forcible Movement—forcible movement of a suspect to police station is a de
facto arrest. The 4th amendment probable cause requirement does not depend on whether
or not an intrusion is termed an “arrest” (see Dunaway v. New York).
b. Arrest by Prolonged Detention—an investigatory detention must be temporary and last
no longer than that which is necessary to effectuate the purpose of the stop. The means
employed should be the least intrusive means that are reasonably available (see Florida v.
Royer, 15 minute detention = arrest).
c. Arrest for the Purpose of Fingerprinting—detentions for the sole purpose of obtaining
fingerprints are no less subject to the constraints of the 4th Amendment (see Davis v.
Mississippi), may be reasonable but still considered under totality of the circumstances.
d. Detention of Personal Effects— one evaluates the seizure of personal effects the same
way we evaluate the seizure of the person (e.g. 90 minute detention of a person’s
belongings is not justified by reasonable suspicion, see United States v. Place).
6. Probable Cause
a. 4th Amendment—“…and no warrants shall be issued but upon probable cause supported
by oath or affirmation.”
i. Search—there must be “substantial probability” that certain items are the fruits,
instrumentalities, or evidence of a particular crime, and that these items are
presently to be found at a certain place.

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ii. Arrest—there must be “substantial probability” that a crime has been committed
and that the person to be arrested committed it.
b. Factors to Consider When Making the Determination that the Degree of Intrusion
Requires Probable Cause:
i. Was there forcible movement (forcible movement = arrest)?
ii. What was the length of detention?
1. Who was responsible for the delay (police of defendant)?
2. Were the police diligently pursuing their investigation during the period
of delay (prolonged detention = arrest)?
c. Tips and Informants (Hearsay Evidence)
i. The Aguilar Two-Prong Test (see Spinelli v. United States)
1. Basis of Knowledge—how did the informant get this information?
2. Veracity—how truthful is the information?
a. What is the reliability of the information?
i. Were there predictive details?
ii. How was the tip corroborated?
b. How credible is the informant?
3. Retained by some states
ii. Totality of the Circumstances (see Illinois v. Gates)—the court, in making a
practical, common-sense decision, should consider the following in determining
whether there is a fair probability that contraband or evidence of a crime will be
found in a particular place…
1. Basis of the knowledge; veracity; corroboration of details; predictive
details of the tip.
2. No one factor is entitled to any more weight than another.
3. Applicable for reasonable suspicion cases (see Alabama v. White).
iii. An anonymous tip alone seldom demonstrates the informant’s basis of knowledge
or veracity. I.e. need some type of corroboration (see Florida v. J.L.).
7. Arrest Warrants
a. When, and under what circumstances, do the police need to obtain an arrest
warrant before they may arrest someone for a crime?
i. Only when the police seek to enter a private place.
b. Challenging Validity of the Warrant—where the defendant makes a substantial
preliminary showing that a false statement knowingly and intentionally, or with reckless
disregard for the truth, was included by the affiant in the warrant affidavit, the 4th
Amendment requires that a hearing be held (see Franks v. Delaware).
i. If, by a preponderance of the evidence, defendant shows false statement, info set
aside, and if remaining content is insufficient for probable cause, warrant voided
and evidence excluded.
c. Warrantless Arrests in Public Places
i. Based on probable cause, an officer can make an arrest for a felony committed in
a public place, regardless of whether it took place in his presence, without a
warrant (see United States v. Watson).
ii. If the officer has probable cause by way of witnessing a misdemeanor, he may
make a warrantless arrest even if there is no breach of the peace (see Atwater v.
City of Lago Vista).
d. Warrantless Arrests in the Home
i. Absent exigent circumstances, the police cannot go into someone’s home even if
they have probable cause without a warrant (see Payton v. City of New
York).

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8. Exigent Circumstances
a. There are four types of exigent circumstances which will allow a police officer to
enter a home without a warrant to effectuate an arrest (officer must still have
probable cause) (see Minnesota v. Olson)
i. Hot Pursuit of a Fleeing Felon
ii. Destruction of Evidence
iii. Danger of Suspect’s Escape
iv. Danger to Police Officers or Others
1. This pertains to the gravity of the offense and the likelihood that the
suspect is armed.
b. Factual Application
i. Steagold v. United States—in the absence of exigent circumstances or consent,
the police must have a search warrant to enter a third person’s home looking for
someone else, even if they have an arrest warrant.
1. It is the third party that would challenge the search, not the arrestee.
ii. Warden v. Hayden—the 4th Amendment does not require that police officers
delay in the course of an investigation if to do so would gravely endanger their
lives or the lives of others.
iii. United States v. Santana—if the defendant is one foot outside the door and one
foot in the house and runs in the house, this represents an exigent circumstance
because the perpetrator could be going inside to destroy evidence (also hot
pursuit).
iv. Welsh v. Wisconsin—an important factor to be considered when determining
whether any exigency exists is the gravity of the underlying offense for which the
arrest is being made.
v. Vale v. Louisiana—an arrest made on the street does not provide its own exigent
circumstances so as to justify a warrantless search of the arrestee’s house.
vi. Mincey v Arizona—a homicide is insufficient to provide exigent circumstances.
vii. Brigham City v Stuart—officers who make a warrantless entry of a home to
provide emergency aid must have an objectively reasonable basis to believe that
an occupant is seriously injured or imminently threatened (i.e. danger to others).
c. Warrantless Seizure of the Premises Under Exigent Circumstances (Secure the
Scene)
i. Segura v. United States—the warrantless entry of a home and a 19-hour
occupation of it is permissible in order to prevent the destruction or removal of
evidence while a warrant is being secured.
ii. Illinois v. MacArthur—the warrantless seizure of a person and their premises by
prohibiting free access to an occupant while waiting for a search warrant allowed
as reasonable, especially when there is a risk of evidence destruction.
d. Knock-and-Announce Rule
i. Richards v. Wisconsin—the common law recognizes a police officer’s authority
to break open a dwelling but generally indicates that he must first “knock and
announce” his presence. A blanket exception for drug offenses is unreasonable.
1. No-Knock Rule—the police must have a reasonable suspicion that
knocking and announcing their presence, under the particular
circumstances, would be dangerous or futile, or that it would inhibit the
effective investigation of the crime by destruction of evidence.
ii. United States v. Banks—reasonableness of wait depends on the circumstances. If
there is a possibility that evidence will be destroyed, 15-20 seconds is a
reasonable wait.

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SEARCES
1. Protected Areas and Interests—what a person seeks to preserve as private, even in an area
accessible to the public, may be constitutionally protected (see Katz v. United States, privacy in
private conversation in a public telephone booth).
a. Two-Prong Reasonable Expectation of Privacy Test
i. Does the defendant have a subjective expectation of privacy?
ii. Is society ready to recognize that expectation as reasonable or legitimate?
b. Open Fields—no expectation of privacy attaches to an open field. This is not a
significant enough intrusion of the 4th Amendment to constitute a violation (see Oliver v.
United States).
c. Curtilage—courts have extended 4th Amendment protections to “curtilage”—the land
immediately surrounding and associated with the home.
i. Curtilage Factors—(1) proximity of area claimed to be curtilage to the home, (2)
whether the area is included within an enclosure surrounding the home, (3) the
nature of the uses to which the area is put, and (4) the steps taken by the resident
to protect the area from observation by people passing by (see United States v.
Dunn)
d. Trash—there is no reasonable expectation of privacy in the trash that is discarded at the
curb (see California v. Greenwood).
e. Luggage—no expectation of privacy attaches to the jostling of luggage because it is a
common occurrence during travel. However, physical manipulation of soft-sided
luggage violates the 4th Amendment because individuals have a subjective expectation of
privacy in their personal effects (see Bond v. United States).
2. Sense Enhancement/Utilization of Technology in Searches
a. Dog Sniffing—dog sniffing does not violate the 4th Amendment because they do not
involve a search (see Illinois v. Caballes and United States v. Place).
b. Helicopters—any member of the public could legally have been flying over curtilage
(see Florida v. Riley).
c. Electronic Beepers/Tracking—nothing in the 4th Amendment prohibited the police from
augmenting the sensory faculties bestowed upon them at birth with such enhancement as
science and technology afforded them in this case (see United States v. Knotts).
i. The use of electronic beepers may result in a 4th Amendment search if it reveals
information concerning a containers movement within a private home.
Especially if this information could not be obtained by visual surveillance alone
(see United States v. Karo).
d. Satellite Technology—surveillance of private property by using highly sophisticated
surveillance equipment not generally available to the public, such as satellite technology,
might be constitutionally proscribed absent a warrant (see Dow Chemical v. United
States).
e. Thermal Imaging—obtaining information about the interior of a private home by way of
sense enhancing technology that could not have otherwise been obtained constitutes a
search. Especially when the technology used is not in the general public use (see Kyllo v.
United States).
3. Search Warrants
a. Assuming the police conduct amounts to a search, what restrictions does the 4th
Amendment impose?
i. Probable cause, unless there is an exception to the warrant requirement
b. Issuance of Search Warrants:
i. Requires the approval of a neutral and detached magistrate; the warrant must
particularly describe the place to be searched and persons/things to be seized

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c. Execution of Search Warrants

i. Officers must abide by the terms of the warrant (time of execution, where the
officers may search, what items may be seized, knock and announce limitations).
d. Anticipatory Warrants
i. No different in principle from ordinary warrants; when an anticipatory warrant is
issued, the fact that the contraband is not presently at the place described is
immaterial, so long as there is probable cause to believe it will be there when the
warrant is executed.
4. Exceptions to the Warrant Requirement—Note: over 70% of searches are conducted in the
absence of a warrant.
a. Searches Incident to Arrest—(1) a search may be made of the person of the arrestee by
virtue of the lawful arrest, and (2) a search may be made of the area within the immediate
possession or control of the arrestee (United States v. Robinson).
i. Rationale: Need to disarm the suspect; need to preserve evidence.
ii. Factors: Trigger (the lawful arrest); Scope (a full search of the person and any
containers located); Time (must be contemporaneous to the arrest).
iii. Factual Application
1. Chimel v. California—an arrest does NOT authorize a search of the
defendant’s entire house incident to that arrest.
2. Washington v. Chrisman—immediate area of a suspect changes if the
arrestee moves.
3. Arizona v. Gant—police may search the passenger compartment and
containers of a car incident to a recent occupants arrest ONLY IF…
a. Reasonable to search when the arrestee is unsecured and within
reaching distance of the passenger compartment at the time of
the search; or
i. Thus, unreasonable if suspect is cuffed and in the back
of cop car.
ii. Loophole—keep suspect unsecured in car and conduct
the search.
b. Reasonable to believe evidence relevant to the crime of arrest
might be found in the vehicle.
c. This rule applies to a search incident to a custodial arrest and
not to an automobile search incident to a traffic citation.
4. Knowles v. Iowa—no search incident to the issuance of a traffic citation.
5. Schmerber v. California—blood tests may be appropriate as incident to a
defendant’s arrest, coupled with the exigency concerning destruction of
evidence. The greatest intrusion is the defendant’s arrest and therefore a
blood test is a lesser intrusion on a defendant.
6. Whren v. United States—the subjective motivations of the officer are
irrelevant to the 4th Amendment analysis so long as there is an objective
basis for the arrest.
b. Vehicle Exception—exception is based on two components: (1) the ready mobility of the
automobile justifies a lesser degree of protection (actual likelihood of mobility not at
issue), and (2) there is a significantly lesser expectation of privacy with respect to one’s
automobile than that relating to one’s home or office (California v. Carney).
i. Factual Application
1. Chambers v. Maroney—in order for officers to search a vehicle without a
warrant, they must have probable cause to search a particular vehicle for
particular articles.

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2. California v. Acevedo—a container in a vehicle is subject to a

warrantless search, so long as officers have probable cause to search the
container. The scope must be limited to where the officer has probable
cause.
3. Wyoming v. Houghton—(1) police officers with probable cause to search
a car may inspect the belongings of any of the passengers found in the
car that are capable of concealing the object of the search; (2) the search
must always be reasonable; if there is probable cause on a firearm,
checking a passenger’s coin purse is not reasonable.
c. Consent—consent must be given voluntarily, meaning it was not the result of duress or
coercion, express of implied (Schneckloth v. Bustamonte).
i. Standard—“Totality of the Circumstances,” factors to determine voluntariness…
1. Was there an implied threat by the police?
2. Was there coercive police questioning?
3. What was the environment under which consent was delivered?
4. Did the police claim that they had authority that they did not?
5. What were the subjective characteristics of the person giving consent?
a. Age, sex, mental or emotional state.
b. Does the person have subjective characteristics that make him
easily persuaded?
6. Was there prior illegal police action?
7. Was the defendant in custody?
8. Did the defendant have knowledge that he had the right to refuse
consent?
ii. Factual Application
1. Florida v. Bostick—the question of voluntariness focuses on how an
innocent person would respond
2. Florida v. Jimeno—the scope of the search is measured by “objective”
reasonableness. The officer’s subjective behavior is not relevant to the
analysis.
a. I.e., what would the typical, reasonable person have understood
by the exchange between the officer and the suspect?
b. Consent can be revoked
c. Consent can also be limited (e.g., the suspect might only consent
to the search of his trunk)
iii. Third Party Consent
1. Illinois v. Rodriguez—the general rule is that in order for the consent to
be valid, the third party must have common authority or apparent
authority over the premises.
a. Test—would the facts available warrant a man of reasonable
caution to believe that the consenting party had authority over
the premises?
2. Georgia v. Randolph—the police may NOT search pursuant to consent if
they are in the presence of an objecting co-tenant.
d. Plain-View Searches
i. Three factors must exist to trigger the plain-view exception…
1. The police must have the lawful right to be present where they are;
2. The police must have the lawful right to physical access of the item;
3. If the item is in plain view, the readily apparent incriminating character
of the item itself provides probable cause that that item is contraband.

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ii. Factual Application

1. Arizona v. Hicks—movement of an object in plain view to permit further
investigation may result in a new search requiring its own probable cause
to be lawful
a. NOTE: the police had a lawful right to be on the premises
because they heard a gunshot come from the apartment. This
gunshot qualified as an exigent circumstance to enter the home
without a warrant.

5. Special Government Needs Searches & Administrative Inspections

a. Inventory and special needs searches and seizures are NOT primarily criminal in nature.
i. The government is intruding upon movement or privacy for some other reason.
b. These types of searches only need to be reasonable based upon the Balancing Test (GI v.
DI.)
i. There must be a significant government interest in order for the intrusion to be
reasonable
ii. Most of these searches require NO individualized suspicion
1. But must be conducted pursuant to some neutral criteria
c. If there some other reason for the police to engage in this investigation, beyond normal
law enforcement?
i. If yes, then analyze.

d. Safety Inspections (involve fire, health, and housing code inspections)

i. When the court determines that special needs exist, it evaluates the government
activity (special need) by the reasonableness-balancing standard. Thus, if the
police find criminal evidence in the course of a permissible safety inspection, it’s
a good search (see Camara v. Municipal Court).
e. Inventory Inspections—inventory searches are routine administrative caretaking
function and not a measure of criminal investigation. The idea is that by inventorying a
suspect’s property, you are protecting it and protecting yourself against any future
accusations or harm.
i. Officer discretion regarding whether to conduct an inventory search of a vehicle
is permissible so long as it is exercised according to standard criteria (see
Colorado v. Bertine).
ii. Police may search an arrested person, as well as his personal effects including
containers, as part of a routine inventory at the police station, incident to his
booking and jailing (see Illinois v. Lafayette).
iii. The inventory of a locked suitcase (container) in the trunk of a vehicle is not
authorized as an inventory search unless departmental procedures exist regarding
the opening of locked containers (see Florida v. Wells).
f. Border Searches
i. A customs inspection of mail entering the U.S. is permissible because such
searches are considered reasonable in light of the fact that the person or item in
question has entered into the country from the outside (see U.S. v. Ramsey).
1. Sufficiently high government interest allows things coming from outside
the country to be searched
2. The rationale is the protection of the United States
3. Because of the significant government interest, people coming into the
country have a reduced expectation of privacy.
ii. A search at the international border of a vehicle’s gas tank is reasonable and does
not require individualized suspicion (see U.S. v. Flores-Montano).

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g. School Searches
i. Ordinarily a search of a student by a school official will be justified at its
inception when there are reasonable grounds for suspecting that a search will
turn up evidence that the student has violated or is violating either the law or the
rules of the school (see New Jersey v. TLO).
ii. Strip search without supporting evidence exceeds TLO’s scope requirement (see
Safford v. Redding).
h. Drug Testing
i. The routine drug testing of candidates for public office is NOT a permissible
special needs search because this is not a compelling enough government interest
(see Chandler v. Miller)
1. No indication that there was a significant drug problem among those
running for public office (symbolic need v. special need)
ii. Random drug testing of railroad employees is reasonable because of the safety
sensitive nature of the job (see Skinner v. Railway)
iii. The suspicion-less drug testing of employees who apply for promotion to
positions involving interdiction of drugs or carrying a firearm; the special need is
prevention of the promotion of drug users to positions where they might carry
weapons and endanger the citizenry (see National Treasury v. Von Raab).
iv. Upheld random drug testing involving high school students participating in any
extracurricular activity, despite evidence of (see Board of Education v. Earls).
1. Government Interest—keeping drugs out of schools; making sure other
students are free from harm.
i. Regulatory Searches
i. In “closely regulated” businesses, such as automobile junkyards, warrantless
searches are permissible (see New York v. Burger).
j. Vehicle Checkpoints
i. Checkpoints for the purpose of checking alien status are permissible so long as
the checkpoints are not individualized, minimal discretion, and are conducted
according to neutralized criteria (see U.S. v. Martinez-Fuerte).
1. The court wants the police to have somebody other than the cops at the
checkpoint decide who to stop.
ii. Checkpoints for the purposes of checking licenses and registrations are
unreasonable if they involve too much officer discretion (see Delaware v.
Prouse).
iii. In the situation of sobriety checkpoints, the intrusion upon the motorist is slight.
The program sufficiently limits the officer’s discretion because sobriety
checkpoints are selected according to established guidelines. The program
addresses the serious concern of drunk driving and there is support in the record
for the proposition that these checkpoints are among the most reasonable
alternatives for dealing with the problem (see Michigan State Police v. Sitz).
iv. City-operated vehicle checkpoints, complete with drug dogs, undertaken to
interdict unlawful drugs, violated the Fourth Amendment because “primary
purpose was to detect evidence of ordinary criminal wrongdoing” (see
Indianapolis v. Edmond).
v. Informational checkpoints are reasonable under the 4th Amendment because the
checkpoint’s primary law enforcement interest was not to determine whether a
vehicle’s occupants were committing a crime but rather to ask the occupants as
members of the public for their help in providing information about a crime that
was committed by others (see Illinois v. Lidster).

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k. Probationers and Parolees

i. The Fourth Amendment does not prohibit a police officer from conducting a
suspicion-less search of a parolee. A requirement that searches of parolees be
based on reasonable suspicion would undermine the state’s ability to supervise
parolees and protect the citizenry from criminal acts by repeat offenders. Also,
parolees and the recidivism rate is 70% (see Samson v. California).
1. The government interest in protecting the public was very high compared
to the relatively low degree of intrusion on a parolee who has already
committed a crime.
ii. Although not rising to the level of a parolee, probationers still have a diminished
expectation of privacy. A search of a probationer subject to a search condition
requires reasonable suspicion (see U.S. v. Knights).

THE EXCLUSIONARY RULE

1. In General—the Exclusionary Rule is the remedy/penalty imposed for violations of the Fourth
Amendment, and there are several limitations and exceptions to this rule.
a. Test—Cost-Benefit Analysis
i. Cost—the loss and exclusion of evidence
ii. Benefit—deter police misconduct; uphold judicial integrity
b. Mapp v. Ohio—overruled Wolf, and stated that the federal exclusionary rule is now
applicable to the States. The Court made it a constitutional rule through the Due Process
Clause of the Fourteenth Amendment.

2. Limitations to the Exclusionary Rule

a. Areas of Limitation
i. Parole Revocation Hearings (NO)—the exclusionary rule cannot be extended
beyond the criminal trial context because application of the rule in other areas
would hinder the functioning of the State parole system and alter the
administrative nature of parole revocation proceedings (see Pennsylvania Board
v. Scott).
ii. Civil Forfeiture Proceedings (YES)—these are quasi-criminal in nature, and thus,
the rule applies in a civil forfeiture proceeding (see Plymouth Sedan v.
Pennsylvania).
iii. Grand Jury Witnesses (NO)—grand jury witnesses may not refuse to answer
questions on the basis of the exclusionary rule (see US v. Calandra)
1. The costs here outweigh the benefits because whatever deterrence of
police misconduct may result from the exclusion of illegally seized
evidence from criminal trials; it is unrealistic to assume that application
of the rule to grand jury proceedings would significantly further that
goal.
iv. Civil Tax Proceedings (NO)—the rule does not apply in civil tax proceedings
brought by different sovereign than that of the offending officers, because police
misconduct will not be deterred in this situation. It falls outside the “officer’s
zone of primary interest” (see US v. Janis).
v. Deportation Proceedings (NO)—the rule does not apply. Deterrence is not
served here because alternative evidence may usually be obtained to deport an
alien (see INS v. Lopez-Mendoza).
vi. Federal Habeas Corpus Proceedings (NO)—the rule has only limited
applicability in federal habeas corpus proceedings brought to overturn state
criminal convictions. Deterrence is so minimal that it really doesn’t apply at all
(see Stone v. Powell)

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vii. Knock and Announce Violations (NO)—The rule does not bar the admission of
evidence discovered after a knock and announce violation (see Hudson v
Michigan).
1. The Exclusionary Rule has never been applied except where its
deterrence benefits outweigh its substantial social costs.
2. In this case, the social costs are considerable. In addition to the grave
adverse consequence that exclusion of relevant evidence entails,
imposing a massive remedy for a knock and announce violation would
generate a constant flood of alleged failures to observe the rule. This
would amount to a get out of jail free card to many defendants.

3. Standing—as a general rule, only those person whose personal Fourth Amendment rights were
violated by the police have standing to challenge the violation. “Suppression of the product of a
4th Amendment violation can be successfully urged only by those whose rights were violated by
the search itself, not by those who are aggrieved solely by the introduction of damaging
evidence” (see Alderman v. US).
a. Question of Standing
i. Whether the movant’s own 4th Amendment rights were intruded upon by police.
ii. Did this defendant have a legitimate expectation of privacy in the area searched?
b. Question of Search
i. Whether activity of police intruded upon anyone’s 4th Amendment rights.
ii. Did anyone have a legitimate expectation of privacy?
c. Standing Factors
i. Test for “Grey Areas” (see Minnesota v. Carter)
1. What was the purpose of the search?
2. How much time was involved in the search?
3. What was the previous relationship between the offender and the third
person?
4. What was the degree of acceptance into the premises?
d. Factual Application
i. Passenger Expectation of Privacy in a Car—a person may not successfully
challenge a search unless his own rights were violated; a mere passenger has no
legitimate expectation of privacy in a car (passenger status may change
depending on the circumstances).
1. The fact that you are the target of the investigation, merely present on the
premises, or claiming ownership of the seized property does not confer
standing (see Rakas v. Illinois).
2. A passenger in an illegally seized automobile may challenge the
constitutionality of the seizure (see Brendlin v. California).
ii. Guest Expectation of Privacy in Another’s Home
1. Overnight Guest—have standing to challenge the violation (see
Minnesota v. Olson).
2. Merely Present with Consent of Owner—may not claim the protections
of the 4th Amendment (see Minnesota v. Carter).
iii. Third Person’s Possessory Interest in Seized Property—a person may not
successfully challenge a search merely on the basis that he has a possessory
interest in the property seized during the search (see Rawlings v. Kentucky).
iv. Third Party Searches—the court’s supervisory power cannot be used to prohibit
admission of evidence from a third-party search when Defendant lacked the
necessary standing to contest the search (see US v. Payner).

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4. Private Searches
a. Actions of private persons (as opposed to State actors) while acting as agents or
instruments of the government may be subject to the exclusionary rule.
i. Totality of the Circumstances
1. Motive of the private actor;
2. Any compensation that the private actor receives from the government;
3. The advice, direction, and level of participation by the government.

5. Exceptions to the Exclusionary Rule—generally, illegally obtained evidence cannot be

admitted against a defendant whose personal Fourth Amendment rights were violated.
a. “Good Faith” Exception
i. Evidence obtained by a search warrant is admissible so long as the officer’s
reliance on the magistrate’s probable cause determination and on the technical
sufficiency of the warrant he issues is objectively reasonable.
ii. Evidence obtained pursuant to a search warrant, later declared invalid, will be
introduced at the defendant’s criminal trial if a reasonably trained officer would
have believed the warrant to be valid.
iii. Factual Application
1. United States v. Leon—The Fourth Amendment does not require the
exclusion of evidence seized pursuant to a facially valid warrant where
the police have acted in good faith.
a. Here, the magistrate is the one who made the mistake; therefore
the deterrence benefits are non-existent.
2. Massachusetts v. Sheppard—The exception applies if there is an
objectively reasonable basis for the officer’s mistaken belief that the
warrant authorized the search that they conducted.
a. Whatever an officer may be required to do when he executes a
warrant without knowing beforehand what items are to be seized,
we refuse to rule that an officer is required to disbelieve a judge
who has just advised him, by word and action, that the warrant
he possesses authorizes him to conduct the search he requested.
3. Groh v. Ramirez—If it appears that the warrant is plainly invalid, the
officer’s reliance on the warrant will be held objectively unreasonable.
4. Illinois v. Krull—The rule does not require suppression of the evidence
obtained pursuant to objectively reasonable reliance on a statute later
found to violate the 4th Amendment.
5. Arizona v. Evans—The good faith exception from Leon, now applies to
errors made by a court clerk as well as a magistrate.
6. Maryland v. Garrison—A search warrant is not defective for
accidentally describing a multiple unit structure as a one-unit structure.
a. The officer’s failure to realize the overbreadth of the warrant was
objectively understandable and reasonable.
7. Herring v. United States—Does the Good Faith Exception apply to
reasonable police error?
a. Yes. Even in the face of police error, where the error is non-
culpable, and not systematic, the deterrence factor is minimal.
b. The court is basically saying that you can’t deter negligence
b. Inevitable Discovery Exception—should the exclusionary rule apply if the illegally
obtained evidence would have been inevitably discovered anyway?
i. Factual Application:
1. Nix v. Williams

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a. Evidence obtained as a result of the denial of constitutional

rights to counsel need not be suppressed if it would have
inevitably been discovered legally.
b. If it is established by a preponderance of the evidence that the
evidence would have been discovered anyway, the evidence is in
no way produced by illegal conduct.
i. The Court said that the police didn’t have the incentive
to violate the 4th Amendment
c. Impeachment Exception—may illegally obtained evidence be used at trial to contradict
the defendant’s testimony or otherwise be used to attack the defendant’s credibility?
i. Factual Application:
1. Walder v. United States
a. If the defendant opens the door for purposes of attacking his
credibility (I.E. Taking the stand), the rule will not operate to
allow perjury by defendants.
b. The defendant testified in a manner completely contradictory to
the suppressed evidence.
i. Heroine had been discovered in his house previously.
2. United States v. Havens
a. On direct examination the defendant denied involvement with
the co-defendant regarding the transportation of cocaine.
b. On cross-examination the defendant denied that she previously
possessed evidence of a crime. This allowed the prosecutor to
introduce illegally obtained evidence that contradicted her
testimony, in order to impeach her credibility.
3. James v. Illinois
a. The prosecutor may not use a statement obtained from the
defendant in violation of the 4th Amendment to impeach the
testimony of a defense witness who provides testimony in
conflict with the defendant’s statements.
i. 3rd party witness statements’ can’t be impeached.

FRUIT OF THE POISONOUS TREE DOCTRINE

1. Assuming that an illegal search or seizure, and no limitation or exception applies, that taint of the
illegality will extend only to the extent that sufficient deterrence benefits. If deterrence is not
served, the taint of the illegality will not extend.
2. Ask the Question: how far down the chain of evidence discovered, to derivative or secondary
evidence, will the Exclusionary Rule be applied?
3. Basically, the Fruit of the Poisonous Tree Doctrine is the Exclusionary Rule applied to derivative
evidence.
4. Exceptions to the Doctrine
a. Attenuation Doctrine—this rule recognizes that the connection between the illegally
obtained evidence and the derivative evidence may be affected by intervening events
which significantly weaken the connection
i. Factual Application
1. Nardone v. United States
a. Even where the evidence may not have been the result of an
independent source, it may still be admissible.
b. The connection may become so attenuated (weakened) as to
dissipate the taint.

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2. Wong Sun v. United States

a. Attenuation Test: Did the evidence come by exploitation of the
illegality or instead by means sufficiently distinguishable to be
purged of the primary taint?
i. MEMORIZE THIS
2. Brown v. Illinois—Following an illegal arrest, Miranda warnings, and
the exclusion of a confession made without them, do not alone
sufficiently deter a 4th Amendment violation.
a. Court said to use the totality of the circumstances approach
i. Were the Miranda warnings given?
ii. What was the purpose and flagrancy of the police’s
conduct?
3. Dunaway v. New York—Reaffirmed the Brown rule that Miranda
warnings alone are not sufficient to attenuate the taint of an
unconstitutional arrest.
4. Taylor v. Alabama (Application of the Brown/Dunaway rule).
a. Suspect’s confession was suppressed even though he was given
the Miranda warnings three times.
i. After receiving the warnings, the suspect was left alone
for a long period of time.
5. New York v. Harris—Where police have probable cause to arrest a
suspect, the Exclusionary Rule does not bar the State’s use of a statement
made by the suspect outside of his home.
a. The violation occurs inside of the home and any evidence
obtained in the home would have to be excluded. Because the
defendant in this case made statements outside of the home,
there is no poisonous tree.
b. Independent Source
i. In order to prove that a source is genuinely independent, the Prosecutor
must prove:
1. There was a warrant issued based on probable cause;
a. The evidence discovered by the illegal entry was not a basis for
the warrant.
2. The motivation for the warrant was not based on a confirmatory search.
ii. Factual Application
1. Murray v. United States—Evidence observed by the police during an
illegal entry of premises need not be excluded if such evidence is
afterword discovered during the execution of a valid search warrant
issued on the basis of information wholly unconnected to the prior entry.
2. Segura v. United State—The legality of an initial illegal entry may have
no bearing on the admissibility of the challenged evidence if there is an
independent source for the warrant under which the evidence was
seized.
a. The Court said that the evidence was admissible because the
police didn’t see the drugs during their illegal entry. They
discovered the drugs when they conducted a valid search with a
warrant.
3. United States v. Crews—
a. An in-court-identification is not the fruit of the poisonous tree.

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b. There is an independent source for a defendant’s in-court-

identification; the victim’s memory.
c. Generally speaking, the court trusts witnesses and doesn’t like
throwing out their testimony.
c. Inevitable Discovery
i. Factual Application
1. United States v. Ceccolini—The greater the willingness of a witness to
freely testify, the greater the likelihood that he or she will be discovered
by legal means and likewise, the smaller the incentive to conduct an
illegal search to discover the witness.
a. There is hardly any deterrence benefit

ELECTRONIC SURVEILLANCE
1. Title III: 18 U.S.C. 2510 – Addresses the federal statutory authorization for wire, oral, or
electronic communications.
a. Search Definition:
i. Attempts to obtain nonconsensual communications when both parties do not
know that they are being recorded.
b. Requirements:
i. Title III requires a warrant to engage in this type of activity.
ii. Title III requires electronic devices to invade a reasonable expectation of privacy
in order to be triggered.
c. Exceptions:
i. Consent.
d. Factual Application
i. Berger v. New York—Wiretapping is a search and seizure for 4th Amendment
purposes.
ii. Dalia v. United States—Those considering the surveillance legislation
understood that by authorizing electronic inception of oral communications in
addition to wire communications, they were necessarily authorizing covert
entries.
iii. Hoffa v. United States—When a person voluntarily speaks to another person, that
person assumes the risk that the listener will not keep the information conveyed
confidential.
1. There is no legitimate expectation of privacy in what you willingly
convey to others.
iv. United States v. White – Undercover Agents—No Constitutional difference
between informant testifying at trial about what he heard a defendant say versus
recording the conversation or carrying a device that enables agents to listen at a
separate location.

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FIFTH AMENDMENT
1. Interrogations and Confessions
a. Constitutional Limitations
i. Due Process Clauses of the 14th and 5th Amendments
1. “No state shall deprive a person of life, liberty, or property, without due
process of law.”
a. If you obtain a confession from a suspect by denying them due
process of law, the confession was involuntarily obtained.
2. Prohibits the use of involuntary confessions in court.
ii. 5th Amendment Privilege against compelled Self-Incrimination
1. “No person shall be compelled in a criminal case to be a witness against
himself…”
a. This clause was interpreted in Miranda to require advice of
rights otherwise statements will be suppressed, even if voluntary.
iii. 6th Amendment Right to Counsel
1. “In all criminal prosecutions, the accused shall have the Assistance of
Counsel for his defence.”
b. Voluntariness
i. Historical Approach
1. Untrustworthiness Test
a. Did the police violate the suspect’s rights so badly, that the court
cannot rely on the veracity of the confession?
i. Was the suspect subjected to “third degree” physical
compulsion?
ii. Did the suspect receive a psychological beat down?
b. Was the suspect compelled to confess to something that was not
true?
2. Police Methods Test
a. Confines the analysis to whether or not the police violated the
suspect’s due process rights.
ii. Totality of the Circumstances Analysis:
1. No single factor will be controlling, just go through the analysis and
come up with the best conclusion you can. The court is always split in
this area.
2. Take into Consideration
a. The objective characteristics of the accused;
b. Circumstances of the interrogation and the resulting confession;
c. Whether or not the defendant was deprived of basic needs;
i. Food, water, heat, etc.
d. Subjective characteristics that may be relevant.
i. Age, intelligence, emotional and mental ability, gender,
experience with the justice system, physical capabilities,
etc.
iii. Factual Application:
1. Arizona v. Fulminante
a. The defendant’s confession was invalidated as not voluntarily
because a paid government informer offered to protect the
defendant prisoner from a perceived threat of physical harm in
exchange for his confession.
b. This case decided that physical violence was not necessary for a
suspect’s confession to be involuntary, a threat is enough.

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2. Frazier v. Cupp
a. The fact that police misrepresent statements that other parties
have made is, while relevant, insufficient to make an otherwise
voluntary confession inadmissible.
b. If the police lie in order to get a confession, that will not be
enough to have a defendant’s confession held inadmissible
c. Trickery and deceit is just one factor in the voluntariness test
3. Colorado v. Connelly
a. Coercive police activity is a necessary predicate to the finding
that a confession is not voluntary within the meaning of the due
process clauses.
b. Absent police conduct causally related to the confession, there is
no violation.
4. Mincey v. Arizona
a. The defendant was in intensive care in the hospital and told the
police he didn’t want to talk. They basically forced him to make
a statement (which he had to write because he couldn’t speak).
b. Statements which are deemed involuntary violate due process
and thus cannot be used for impeachment purposes.
5. Miller v. Fenton
a. What kind of trickery may the police employ after the suspect
has waived his rights?
b. The Court held that the defendant had made his confession
voluntarily, even though the police interrogator had made several
misrepresentations and even lied to Mr. Miller in order to get the
confession.
i. In order to analyze this type of fact pattern on the exam,
evaluate the totality of the circumstances and draw a
conclusion.
1. There is no bright line rule.
iv. Problems with the Voluntariness Test:
1. Vagueness;
2. Proof problems;
3. Discretion and local pressures;
4. The U.S. Supreme Court can only review a small portion of the cases.
v. Even though we have Miranda now, voluntariness is still used to review
confessions. A suspect may not be in custody and therefore, Miranda will not
apply.

2. Miranda v. Arizona
a. Represents the 5th Amendment’s Application to Custodial Interrogations.
i. Created a blanket assumption that inherent compulsion results when a defendant
is taken into custody and subjected to police interrogation.
1. Where you have custodial interrogation, there is a police dominated
atmosphere. There is an implicit message that you are not leaving unless
you talk. A confession given under circumstances of inherent compulsion
is essentially the defendant being compelled to incriminate himself.
2. The prosecution may not use statements, whether exculpatory or
inculpatory, stemming from custodial interrogation of the defendant
unless it demonstrates the use of procedural safeguards effective to
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ii. Miranda warnings are not required when a suspect is arrested, they are
ONLY required before interrogation commences.
1. Advice of Rights:
a. This is an absolute prerequisite in overcoming the inherent
pressures of the interrogation atmosphere. The courts are not
going to stop to check and see if the suspect knew his rights.
b. A warning is a clear-cut fact, either it was there or it was not.
The result of a failure to warn is an exclusion of the confession
period.
i. Right to remain silent;
ii. If you choose to speak, anything you say can and will be
used against you in a court of law;
iii. Right to an attorney during questioning.
iv. Attorneys will be provided to those who cannot afford
them.
2. The only way to Waive your rights is with a KIV waiver:
a. Knowing, intelligent, and voluntary. This is the standard that the
prosecution must meet to show that the defendant waived his
rights.
i. “First, the relinquishment of the right must have been
voluntary in the sense that it was the product of a free
and deliberate choice rather than intimidation, coercion
or deception. Second, the waiver must have been made
with the full awareness both of the nature of the right
being abandoned and the consequences of the decision to
abandon it.” See Johnson v. Zerbst.
b. Aftermath of the Miranda Decision:
i. Michigan v. Tucker—Violating Miranda does not always result in a
constitutional due process violation. The court in Tucker did not see Miranda as a
constitutional rule, but rather as a “prophylactic” rule.
ii. New York v. Quarles—Carved out a “public safety exception” to the Miranda
rule. There is a public policy allowing officers to act to prevent further danger to
the public.
1. Questions must be reasonably related to the concern for public safety;
2. This is an objective determination;
3. Both the statement and any derivative evidence will be admissible.
iii. Oregon v. Elstad (1987)—Because Miranda was not a “core” constitutional
right, it is not entitled to the “fruit of the poisonous tree” doctrine, which operates
to exclude the fruits of illegal searches.
1. Miranda has its own exclusionary rule.
2. If law enforcement officers in administering the prophylactic Miranda
procedures make errors, they should not breed the same irremediable
consequences as police infringement of the 5th Amendment itself.
c. 18 U.S.C. 3501—This was a congressional attempt to override the court’s decision in
Miranda and was extensively fought over in Dickerson v. United States.
i. The statute provided that the admissibility of a custodial suspect’s statement
should turn only on whether or not the statement was voluntarily made.
d. Dickerson v. United States (This case represents a territorial war between the court and
the legislature over the reach of the Miranda decision).
i. The Supreme Court stated that because Miranda is a constitutional rule, the
legislature has no power to statutorily overrule it.

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ii. Miranda warnings are constitutional enough that they apply to the States.
1. However, they are not so constitutional that fruit of the poisonous tree
will flow from them.
e. When is Miranda triggered?
i. Miranda Custody Test:
1. As stated by the Court in Miranda, “By custodial interrogation, we mean
questioning initiated by law enforcement officers after a person has been
taken into custody or otherwise deprived of his freedom of action in any
significant way.”
2. A person is “in custody” for purposes of receiving Miranda warnings if
“there is a ‘formal arrest or restraint on freedom of movement’ of the
degree associated with a formal arrest.” California v. Beheler, 463 U.S.
1121, 1125 (1983) (per curiam) (quoting Oregon v. Mathiason, 429 U.S.
492, 495 (1977)).
a. In these circumstances the suspect will feel compelled to respond
to police questioning.
i. NOTE: Just because a suspect is put into handcuffs does
not necessarily mean that he is in custody.
ii. You have to look at the Totality of the Circumstances.
3. Factual Application
a. Orozco v. Texas—Miranda warnings are required prior to
custodial interrogation regardless of the location.
i. Even though the suspect was at his home, the
interrogation took place at 4 am and the Court concluded
that a “police-dominated atmosphere” existed; therefore
the suspect was in custody.
b. Minnesota v. Murphy—Meeting with a probation officer
resulting in subsequent questioning does not constitute custodial
interrogation.
c. Yarborough v. Alvarado—Custody is determined based upon
how a reasonable person in the suspect’s situation would have
perceived his circumstances.
i. Subjective concerns such as age or experience do not
come into play.
ii. This is an objective test.
1. Use the totality of the circumstances.
2. Subjective characteristics of the suspect are not
relevant.
iii. Use this test to determine if a person is in custody.
d. Beckwith v. United States—“Focus” can exist in the absence of
“custody.”
i. Therefore, Miranda warnings are not required.
ii. The Court concluded that the suspect was not in custody
because he was at home, and the facts didn’t show that
he was compelled to confess.
ii. Miranda Interrogation Test:
1. Was there some activity initiated by law enforcement officers, which
resulted in questioning of the suspect?
a. Direct questioning by the Police.
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a. Rhode Island v. Innis—Express questioning or its functional

equivalent will constitute interrogation.
i. This means any words or actions on the part of the
police which the officers know or should know are
reasonably likely to produce an incriminating response.
b. Arizona v. Mauro—Police officers do not interrogate a suspect
simply by hoping that he will incriminate himself (third party, in
this case the defendant’s wife, spoke with the defendant).
c. Illinois v. Perkins—Miranda warnings are not required when the
suspect is unaware that he is speaking to a law enforcement
officer and gives a voluntary statement.
i. It is the pressure of giving answers to the police in a
police dominated atmosphere which gives rise to
compulsion.
ii. The interrogator must be a “known” State actor.
1. NOTE: The suspect must be aware that he is
talking to a State actor for Miranda.
f. Testimonial Evidence
i. In order for Miranda to be triggered, the police must be seeking testimonial
evidence. The police ask you to describe your involvement in words. If the police
are seeking non-testimonial evidence then Miranda is not triggered.
ii. Non-testimonial evidence includes things such as blood samples, handwriting
samples, lineups, voice identification, etc…
iii. Factual Application
1. Schmerber v. California—The 5th Amendment is NOT violated if a
person is simply ordered to produce blood samples. Blood samples do
not involve the suspect having to provide testimonial evidence and thus,
the 5th Amendment is not implicated.
2. United States v. Wade—A person may be lawfully compelled at a lineup
to utter words expressed by a suspect if the purpose is to use his voice
as an identifying characteristic and not to speak to his guilt.
3. Pennsylvania v. Muniz—The “seven booking questions” are non-
testimonial evidence.
a. The “sixth birthday question” is considered testimonial evidence
because it would require the suspect to provide evidence of
intoxication and also an inference of guilt.
4. Hiibel v. Sixth Judicial Circuit Court—Disclosure of a suspect’s name
pursuant to a state’s “stop and identify statute” presents no reasonable
danger of incrimination (in dicta, could be incriminating).
3. Miranda Warnings
a. Assuming that the defendant has been subjected to custodial interrogation, exactly
what does Miranda require the police to do in this situation?
i. California v. Prysock
1. The Court has never indicated that the rigidity of Miranda extends to the
precise formulation of the warnings given a criminal defendant.
2. Miranda warnings need only be given in a reasonable fashion.
3. The wording doesn’t have to be perfect in order to be valid.
ii. Duckworth v. Eagan
1. The inquiry is simply whether the warnings reasonably convey the
Miranda rights to the suspect.

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2. Reviewing courts do not have to dissect the wording of Miranda

warnings with any precision.
3. The warnings must be conveyed in a reasonable manner. They don’t
have to be conveyed word for word.
iii. Colorado v. Spring
1. Does the suspect have the right to be made aware of the subject
matter of the questioning? NO.
2. The constitution does not require that the defendant be aware of every
possible consequence of executing a waiver.
3. The failure of the police to inform the suspect of all the possible subjects
of the interrogation is not the type of police trickery which was
condemned in Miranda.
iv. Moran v. Burbine
1. The constitution does not require the police to tell a suspect that an
attorney is trying to contact him.
2. Events that occur outside of the presence of the suspect and entirely
unknown to him can have no bearing on the capacity to comprehend and
knowingly relinquish a constitutional right.
a. NOTE: This would be different in a 6th Amendment context.
4. Miranda and Related Matters
a. What Constitutes a Waiver?
i. The giving of Miranda warnings and a subsequent confession is NOT enough
to constitute a waiver.
1. This requires a voluntariness determination in two contexts
a. Voluntariness of the confession;
b. Voluntariness of the waiver of Miranda rights.
i. The waiver must be knowing, intelligent, and voluntary.
ii. “First, the relinquishment of the right must have been
voluntary in the sense that it was the product of a free
and deliberate choice rather than intimidation, coercion
or deception. Second, the waiver must have been made
with the full awareness both of the nature of the right
being abandoned and the consequences of the decision to
abandon it.”
2. Implied Waivers see North Carolina v. Butler
a. Waivers may be implied even where the waiver was not
expressly or explicitly given.
b. A waiver will not be presumed from silence but that does not
mean that silence coupled with an understanding of his rights
and a course of conduct indicating waiver may be enough to
imply that the suspect waived his rights.
i. Here the suspect was advised of his rights but refused to
sign a waiver. He decided to speak to the Police anyway
without signing the form.
ii. The Supreme Court concluded that the suspect’s
behavior might have resulted in an implied waiver.
1. NOTE: The presumption is against waiver.
iii. The prosecutor must prove by a preponderance of the
evidence that a suspect has waived his rights.

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3. Qualified Waivers see Connecticut v. Barrett

a. Oral waivers are effective when a suspect refuses to make a
written statement without counsel present.
b. The defendant’s ignorance of the consequences of his decisions
does not vitiate their voluntariness.
i. I.E. The defendant may make a limited waiver and so
long as the police comply with the limitation, any
statement which follows is admissible.
b. How does a Suspect Invoke his Miranda Rights?
i. Right to Counsel
1. Fare v. Michael C.—A request by a suspect to see his probation officer
does not amount to a request for an attorney under Miranda.
a. The Court looked at the totality of the circumstances.
b. If Miranda is not implicated, check for a due process
“voluntariness” violation.
c. Then you can bring in the subjective characteristics of the
defendant.
i. I.E. Age, intelligence, experience with the criminal
justice system, mental stability, etc…
2. Davis v. United States—The suspect must clearly articulate his desire to
have counsel present sufficiently that a reasonable police officer in the
circumstances would understand the statement to be a request for an
attorney.
a. He must actually request an attorney.
b. Ambiguous statements will not be sufficient to invoke the right to
counsel and police are not obligated to ask clarifying questions
to be sure.
i. “Maybe I should talk to a lawyer”—ambiguous
ii. “I think I want a lawyer before I say anything”—
unambiguous
ii. Right to Silence
1. Berghuis v. Thompkins—Invocation must be unambiguous
2. Michigan v. Mosley (yield case)
a. The Miranda right to silence does not mean that the police may
never resume interrogation after a suspect asserts his right to
silence nor does it mean that they only need to cease questioning
momentarily.
b. Mosley Test: Was the defendant’s right to cut off questioning
scrupulously honored?
i. Determinative Factors:
1. Did the questioning cease?
2. How long was the break in time between the two
conversations?
3. Was the defendant Mirandized a second time?
c. What Must the Police do if the Suspect Invokes his Rights?
i. Edwards v. Arizona (stop case)—Once a suspect has invoked his right to
counsel, he may not be subjected to further interrogation until counsel has been
made available to him.
1. This rule only applies to the extent that the suspect is still in custody.
a. Exception: If the defendant initiates further communication,
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2. Invoking the right to counsel carries the implied message that the
defendant needs help and cannot proceed on his own.
ii. Oregon v. Bradshaw—A comment or inquiry made by the defendant that can be
fairly said to represent a desire to open up a generalized discussion relating
directly or indirectly to the investigation constitutes initiating further
communication under the Edwards rule. “What’s going to happen to me now?”
1. This is an application of the Edwards rule.
2. There must be a new set of Miranda warnings at this point.
iii. Arizona v. Roberson—Extends the Edwards rule to bar police-initiated
interrogation regarding offenses unrelated to the subject of the original
interrogation.
1. This rule applies only while the suspect is still in custody.
iv. Minnick v. Mississippi—Once a suspect in custody invokes his right to counsel,
the police must not only permit the suspect to consult with an attorney but they
may not re-initiate questioning unless counsel is present.
1. Unless further conversation is initiated by the defendant.
v. Maryland v. Shatzer—police can wait 14 days before re-initiating interrogation
after an Edwards invocation.
d. Application of Miranda
i. When required?
1. Custody and interrogation
ii. Warnings and Waiver?
1. Incantation of warnings
2. KIV waiver
3. When has D waived his rights?
iii. What if D invokes one of his rights?
e. Limitations and Exceptions to the Miranda:
i. Public Safety Exception
1. New York v. Quarles—Overriding considerations of public safety justify
an officer’s failure to provide Miranda warnings.
a. Not every statement would be admissible.
b. The question by the police must relate to the public safety
concern.
i. Fruit of the poisonous tree would be admissible under
this exception.
ii. Here the Police asked the suspect where the gun was
located.
ii. Fruit of the Poisonous Tree
1. Missouri v. Seibert—The second statement obtained from a suspect after
an initial Miranda violation and a subsequent Miranda warning may be
admissible.
a. Seibert Test: Did the delivery of Miranda warnings really advise
the suspect that he could invoke them?
i. Factors to Consider in the Determination:
1. The level of detail involved in the incriminating
statement; (The more detail, the more likely that
the statement will be thrown out.)
2. The timing and location;
3. The continuity of police personnel;
4. The continuity of the first and second
statements.

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2. United States v. Pantane—Nontestimonial physical fruits of an

unwarned statement are admissible at trial.
a. The weapon was held to be admissible.
iii. Impeachment
1. Harris v. New York—The prosecutor may use a statement obtained in
violation of Miranda to impeach a defendant who testifies at trial
inconsistently with that statement.
a. These statements are not admissible in the prosecutor’s case-in-
chief though.
b. The Miranda exclusionary rule does not operate to allow
defendants to commit perjury.
i. However, statements that violate due process (coercive
and involuntary) are never coming in.
2. Oregon v. Hass (This case represents an extension of the Harris rule)
a. An un-counseled statement provided after a suspect asks for a
lawyer (but is not provided with one) can be used for
impeachment purposes.
3. Mincey v. Arizona—The use of involuntary or coerced statements even
for impeachment purposes would constitute a “denial of due process of
law.”
a. Therefore they are not admissible.
b. This represents an actual violation of the constitution in contrast
to a mere Miranda violation.
4. New Jersey v. Portash—Testimony given by a person in response to a
grant of legislative immunity could not be used to impeach him at his
subsequent trial for extortion and misconduct in office.
iv. Impeachment by Pre-Trial Silence
1. Doyle v. Ohio—It is impermissible to use a defendant’s silence upon
receipt of Miranda warnings for impeachment purposes. You cannot
penalize a defendant who invokes his rights.
a. This is the only one that is restrictive because of the
governmental activity.
2. Jenkins v. Anderson—The use of pre-arrest silence to impeach a
defendant’s credibility does not violate the 5th Amendment.
a. In this case there is no state activity.
3. Fletcher v. Weir—The use of post-arrest/pre-Miranda silence to
impeach a defendant’s credibility does not violate the 5th Amendment.
v. Habeas Corpus Proceedings
1. Withrow v. Williams—Stone v. Powell does not extend to a state
prisoner’s claim that his conviction rests on statements obtained in
violation of Miranda.
a. You can raise Miranda in your petition for a writ of habeas
corpus.

5. Grand Juries
a. Generally speaking the Grand Jury serves two functions:
i. The Sword—Grand juries are investigative in nature.
1. I.E. the grand jury has the power to issue subpoenas and to compel
individuals to testify.
ii. The Shield—The grand jury is also the body that sits between the prosecutor and
the accused and thus, operates as a check on the prosecution.

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1. They make sure that the prosecutor only brings charges in those cases
that are supported by probable cause.
b. A Grand Jury Proceeding is a Secret Proceeding:
i. There is no judge present, the accused has no right to be present nor does he have
a 6th Amendment right to counsel.
ii. The ordinary rules of evidence do not apply
1. I.E. Hearsay is admissible and the exclusionary rule is not applicable.
c. 5th Amendment:
i. “No person shall be held to answer for a capital or otherwise infamous offense,
unless on a presentment or indictment of a grand jury.”
d. Factual Application:
i. United States v. Williams—In light of the grand jury’s accusatory nature, there is
no obligation on the government’s part to present to the grand jury material
exculpatory (evidence tending to disprove guilt) evidence.
1. This is not a constitutional requirement though.
e. Grand Jury Privileges:
i. Self Incrimination;
1. Hoffman v. United States—To sustain the privilege, it need only be
evident from the implications of the question, in the setting in which it is
asked, that a responsive answer to the question or an explanation of why
it cannot be answered might be dangerous because injurious disclosure
could result.
a. Answers that would provide a link in the chain of evidence are
protected under this privilege.
ii. Immunity;
1. The type of immunity at play depends on the jurisdiction.
a. Transactional Immunity—This an absolute bar to prosecution
for the offense to which that testimony relates.
i. You can’t be prosecuted for the subject matter that you
testify to.
b. Derivative use/ Use Immunity—This is a bar to the use of the
testimony in a prosecution, however you can still prosecute.
i. The prosecutor just cannot use the derivative evidence.
c. Factual Application:
i. Kastigar v. United States—Statutory grant of immunity
co-extensive with 5th Amendment protection is sufficient
to compel testimony over the 5th Amendment privilege.
1. Test: Independent Source Doctrine:
a. So long as the prosecution has an
independent, legitimate source for the
disputed evidence, it is coming in.

6. Double Jeopardy
a. General Rule: The prosecution only gets one bite at the apple.
b. 5th Amendment: “No person shall be subject for the same offense to be twice put in
jeopardy of life or limb.”
i. This is considered a fundamental right and is thus applicable to the states
via the 14th Amendment.
1. Allowing re-prosecution involves a danger that eventually someone will
be convicted merely by being worn down.
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ii. What does it mean to be in jeopardy?

1. In Jeopardy:
a. When the jury is impaneled and sworn; or
b. A bench trial when the first witness is sworn in.
2. Of life or limb:
a. Double jeopardy clause applies to all crimes, even those for
which the potential punishment is only a monetary fine.
iii. What is the Same Offense?
1. United States v. Dixon
a. Blockburger Test: Where the same act or transaction violates
two statutory provisions the test to apply to determine whether
there are two offenses is whether each provision requires proof
of a fact which the other does not.
i. In this situation chart out the elements of the offenses
and compare them.
ii. If there is one element that must be proven for one
crime, but does not have to be proven for the other, then
the crimes are not the same and double jeopardy doesn’t
apply.
b. Grady-Corbin Test:
i. Is each offense going to be proved using the same
evidence?
iv. Under what circumstances is a defendant twice put in jeopardy?
a. Illinois v. Somerville—A trial judge properly exercises his
discretion to declare a mistrial if an impartial verdict cannot be
reached, or if a verdict of conviction could be reached but would
have been reversed on appeal due to an obvious procedural error
in the trial.
i. The granting of a mistrial should only be done with the
greatest of caution and hesitation. It should only be done
in cases of manifest necessity (ends of public justice
would otherwise be defeated)
1. Manifest necessity means the prosecutor can
come back and re-prosecute.
b. Oregon v. Kennedy—Generally a defendant cannot ask for a
mistrial unless the prosecutor is attempting to provoke his
mistrial motion.
c. United States v. Scott—Where the defendant himself seeks to
have the trial terminated without any submission to either judge
or jury as to his guilt or innocence, an appeal by the government
from his successful effort to do so is not barred (because re-
prosecution is allowed).
i. I.E. If the jury finds the defendant guilty and the judge
enters an acquittal notwithstanding the verdict or where
the trial ends with the issue of guilt not being decided
(dismissal).
1. A dismissal stops the trial in the defendant’s
favor.
2. But it doesn’t resolve factual guilt or innocence.
3. Re-prosecution is not barred.

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ii. There is no re-prosecution following an acquittal.

1. But the DJ clause does not prevent the
government from appealing an acquittal as long
as the defendant is not going to have to
withstand a second trial.
d. Lockhart v. Nelson
i. This case involved a re-prosecution following a
conviction.
ii. Permitting a re-trial in this instance is not the sort of
governmental oppression at which the double jeopardy
clause is aimed; rather, it serves the interests of the
defendant by affording him a fair opportunity to obtain a
fair re-adjudication of his guilt, free from error.
iii. If a lot of evidence was admitted during the prosecution,
but then it is determined that one small piece of evidence
should not have been held admissible, the defendant can
be re-prosecuted without the illegal evidence.
e. Burks–held that when an appellate court reverses a defendant’s
conviction on the sole ground that the evidence was insufficient
to sustain the jury’s verdict, the Double Jeopardy Clause bars a
retrial on the same charge.
f. Heath v. Alabama—The dual sovereignty doctrine, as originally
articulated and consistently applied by the court, compels the
conclusion that successive prosecution by two states for the same
conduct are not barred by the double jeopardy clause.
i. I.E. If the same offense occurs in two separate
sovereigns, you may prosecute in both sovereigns.
ii. When the defendant in a single act violates the peace and
dignity of two sovereigns, he can be prosecuted in both
states.
c. SUMMARY
i. If the defendant opposes the mistrial:
1. Re-prosecution is permitted if under the TOC there is a manifest
necessity in existence for terminating the trial
ii. If D requests or consents to mistrial:
1. DJ does not bar re-prosecution
2. Except: Government’s conduct is intended to goad the D into moving
for a mistrial.
iii. Acquittal on the merits bars re-prosecution
1. A dismissal requested by the defendant, based upon a technicality is not
an acquittal so re-prosecution is not barred.
2. DJ clause does not bar re-prosecution of D who successfully appeals
conviction on basis of trial error (unless sole ground is insufficient
evidence).
_____________________________________________________________________________________

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SIXTH AMENDMENT—“In all criminal prosecutions, the accused shall enjoy the right to a speedy and
public trial, by an impartial jury… and to be informed of the nature and causes of the accusation; to be
confronted with the witnesses against him; to have a compulsory process for obtaining witnesses in his
favor; and to have the assistance of counsel for his defense.”
1. Right to Counsel
a. Factual Application
i. Betts v. Brady—In 1942, the right to counsel was not considered so fundamental
that that the Supreme Court could require the states to provide defendants with
counsel in criminal prosecutions.
1. The only instances where counsel would be provided were capital
offenses or cases with special circumstances.
ii. Gideon v. Wainwright—This case rejected the Betts holding. The 6th Amendment
Right to Counsel protection is now applicable to the states through the 14th
Amendment Due Process Clause so long as the defendant has been charged with
a felony.
1. Any potential punishment of more than 1 year is a felony.
2. Any potential punishment of less than 1 year is a misdemeanor.
iii. Argersinger v. Hamlin—Absent a knowing and intelligent waiver, no person may
be imprisoned for any offense, whether classified as petty, misdemeanor, or
felony unless counsel represented him.
1. If the punishment for any offense is incarceration, the defendant has a
right to counsel.
iv. Scott v. Illinois—The 6th and 14th Amendments require that no indigent criminal
defendant be sentenced to a term of imprisonment unless the state has afforded
him the right to the assistance of appointed counsel in his defense.
1. If the defendant is not sentenced to a term of imprisonment the protection
does not attach.
v. Alabama v. Shelton—A suspended sentence triggers the 6th Amendment “term of
imprisonment” rule announced in Argersinger and Scott.
vi. Review
1. All felony cases
2. Misdemeanors only if D sentenced to a term of imprisonment.
b. 5th Amendment Right to Counsel v. 6th Amendment Right to Counsel—The 5th
Amendment right attaches whenever a suspect is taken into custody and subjected to
police interrogation. The right to counsel attaches to dispel the inherent compulsion that
results from such an atmosphere.
i. The 5th Amendment is triggered by custodial interrogation.
ii. The 6th Amendment is triggered by AJCP.
iii. The 6th Amendment right attaches when adversarial criminal judicial proceedings
(ACJP) have commenced against the defendant.
1. Adversarial Judicial Criminal Proceedings
a. Formal charge;
b. Indictment;
c. Information;
d. Arraignment;
e. Preliminary Hearing.
i. If one of these 5 has occurred, then the 6th Amendment is
triggered.
c. Massiah v. United States—The petitioner in this case was denied the basic protections of
the right to counsel when there was used against him at trial evidence of his own

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incriminating words, which federal agents had deliberately elicited from him after he had
been indicted, and in the absence of counsel.
i. This was not a 5th Amendment Miranda issue because the petitioner was not
subjected to custodial interrogation, was not in a police dominated atmosphere,
and was not speaking to a known state actor.
ii. This case implicates the 6th Amendment because there was police activity aimed
at eliciting incriminating statements post indictment and without counsel.
1. Triggering event: Adversarial criminal judicial proceedings
2. Coupled with: Deliberate elicitation of incriminating statements.
d. Deliberate Elicitation
i. Brewer v. Williams—The right to counsel means that a person is entitled to the
help of a lawyer at or after the time that ACJP have been initiated against him.
1. Any incriminating statements made by the defendant that are deliberately
elicited by the police post ACJP have commenced have to be excluded.
a. Exception: affirmative KIV waiver.
ii. United States v. Henry—Conduct that is less than purposeful may result in
deliberate elicitation.
1. If the police engage in conversations designed to draw out
incriminating information there is deliberate elicitation.
a. The agent in this case was a “mouth piece.”
iii. Kuhlman v. Wilson—placing a police agent in a jail cell with a person against
whom formal charges have been brought violates the 6th Amendment.
1. The violation occurs when the informant takes some action that goes
beyond merely listening that is designed to deliberately elicit
incriminating remarks.
a. The agent in this case was merely a “listening post.”
iv. Maine v. Moulton—Incriminating statements pertaining to pending charges are
inadmissible at the trial of those charges.
1. Notwithstanding the fact that the police were also investigating other
crimes, if, in obtaining the evidence, the state violated the 6th
Amendment by knowingly circumventing the accused’s right to the
assistance of trial.
a. 6th Amendment protection is offense specific.
i. Thus, if the police obtain statements pertaining to an
offense for which ACJP has not commenced, the
statements pertaining to that other offense are coming in.
1. Ex. If a suspect is arrested for robbery,
indicted, and then released on bond, and then
the police approach him to question him about
his involvement in a rape, the 6th Amendment is
not triggered because it is not about the same
offense.
e. Interrogation
i. Resumption of Interrogation
1. Montejo v. Louisiana
a. A criminal suspect does not invoke his right to counsel under the
6th Amendment sufficient to block further interrogation unless
specifically invoked to the police.
b. After AJCP, a defendant has the right to counsel in the 6th
Amendment for all critical stages of an investigation, and
custodial interrogation is one of those.

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c. A post-AJCP defendant can waive his 6th Amendment right to

counsel in the same fashion he does so under the 5th Amendment,
even if counsel has been appointed or requested by him.
d. Advice of rights under Miranda is sufficient to inform a D of his
6th Amendment right to counsel.
2. McNeil v. Wisconsin—Police are not required to cease interrogation
regarding other, uncharged offences, since the 6th Amendment does not
apply as to those crimes.
3. Texas v. Cobb—In evaluating the offense specific nature of the 6th
Amendment Right to Counsel, “offense” is defined by the Blockburger
test.
a. Whether each provision requires proof of a fact that the other
does not.
ii. 5th Amendment vs. 6th Amendment Interrogation
1. 5th Amendment
a. Edwards—Interrogation must stop regarding the instant offense.
b. Roberson—Interrogation must stop regarding all other offenses
as well.
2. 6th Amendment
a. Montejo—Interrogation must stop regarding the instant offense.
Can reinitiate noncustodial interrogation if waiver obtained after
reading Miranda warnings (14 days after break in custody?)
b. McNeil/Cobb—Interrogation regarding all other offenses is
permissible.
iii. Valid Waivers
1. Patterson v. Illinois—What constitutes a valid waiver of the 6th
Amendment Massiah right?
a. Generally speaking, an accused that is admonished with the
Miranda warnings has been sufficiently appraised of the nature
of the 6th Amendment rights, and of the consequences of
abandoning those rights, so that his waiver on this basis will be
considered a knowing and intelligent waiver.
f. Impeachment
i. Michigan v. Harvey—Statements taken in violation of the 6th Amendment may
be used to impeach a defendant’s false or inconsistent testimony.
ii. Kansas v. Ventris—Impeachment and the 6th Amendment Right to Counsel
1. Statements obtained in violation of the 6th Amendment right to counsel
may be used to impeach a defendant’s false or inconsistent testimony.
g. Eyewitness Identification—The defendant is entitled to the presence of counsel at any
“critical” stage in the prosecution where there is more than minimal risk requiring the
presence of counsel to ensure a fair trial.
i. Pretrial Identification
1. United States v. Wade—A post- ACJP pretrial physical lineup is a
“critical stage” in the prosecution
a. Fruit of the poisonous tree applies to the pretrial lineup;
however, the witness may identify the defendant in the
courtroom if the identification is the result of an independent
source.
i. Factors for an Independent Source Test
1. The prior opportunity to observe the alleged
criminal act;

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2. The existence of any discrepancy between any

pre-lineup description and the defendant's actual
description;
3. Any identification prior to lineup of another
person;
4. The identification by picture of the defendant
prior to the lineup;
5. Failure to identify the defendant on a prior
occasion;
6. The lapse of time between the alleged act and
the lineup identification.
2. Kirby v. Illinois—Eyewitness Identification
a. Turning away from Wade.
b. The right to counsel rule is not applicable to a lineup prior to the
initiation of ACJP.
i. However, you may always fall back to a due process
violation.
3. Moore v. Illinois—Eyewitness Identification
a. Adversarial judicial criminal proceedings are “initiated” for 6th
Amendment purposes, at pre-indictment stage of a preliminary
hearing.
4. United States v. Ash—A person against whom ACJP have commenced is
not entitled to the presence of counsel when a witness attempts to
identify a suspect in a photo array.
a. Photo lineups can be reconstructed and verified in court.
h. Due Process Violations
i. Stovall v. Denno—A person without a right to counsel argument can argue for a
due process violation if the identification procedure was “so unnecessarily
suggestive and conducive to irreparable mistaken identification that he was
denied due process of law.”
1. The court wants to make sure that they have found the right guy.
a. To determine if the identification was reliable evaluate the
totality of the circumstances:
i. Was the identification unnecessarily suggestive?
1. This is a threshold requirement. There will be no
due process concern if nothing is unnecessarily
suggestive. However, identification may be
unnecessarily suggestive and still not violate due
process.
2. The burden to show that the identification was
suggestive is on the defendant.
ii. Was the identification conducive to irreparable
mistaken identification?
1. The burden to show that the identification was
not conducive to mistaken identification is on
the prosecution.
ii. Simmons v. United States—STOVALL TEST REVISED: the identification “was
so impermissibly suggestive as to give rise to a very substantial likelihood of
irreparable misidentification.”

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iii. Manson v. Braithwaite—Rejected the per se rule in favor of the totality of

circumstances test, furnishing protection against the use of unreliable eyewitness
testimony.
1. Factors to look at to determine if identification is conducive to
irreparable mistaken identification (T.O.T.A.L.)
a. Time between crime and confrontation.
b. Opportunity of witness to view the criminal at the time of the
crime.
c. The witness’s degree of attention
d. Accuracy of prior description of the criminal.
e. Level of certainty demonstrated.
i. Identification Review
i. Wade—A post ACJP physical lineup is a “critical stage” in which counsel is
required.
1. If Wade is violated, evidence of an out of court identification will be
suppressed.
2. The fruit of an in court identification is still admissible if the
“independent basis” test is met by clear and convincing evidence.
ii. Ash—Counsel is not required at a photo array identification regardless of
whether it is pre or post ACJP.
iii. Kirby—Counsel is not required at a pre- ACJP lineup.
iv. Stovall—“Due Process” is violated under the totality of circumstances if the line
up procedure was:
1. Unnecessarily suggestive;
2. Conducive to irreparable mistaken identification;
3. Photo identification (pre or post ACJP);
4. Physical line up (pre or post ACJP)

2. Effective Assistance of Counsel

a. 6th Amendment—“In all criminal prosecutions, the accused shall . . . have the assistance
of counsel” . . . includes the “effective” assistance of counsel, see McMann v.
Richardson.
b. What is the basis for the right to effective counsel?
i. Jones v. Barnes—An indigent defendant may not compel appointed counsel to
argue all non-frivolous points if counsel, “as a matter of professional
judgment,” decides not to do so.
1. Defense counsel wins in matters of strategy.
2. Some matters are still up to the defendant:
a. Whether to plead guilty or not guilty;
b. Whether to testify;
c. Whether to take an appeal or waive a jury.

ii. Strickland v. Washington

1. In this case the Supreme Court defined “ineffective assistance of
counsel” for 6th Amendment purposes:
a. The “benchmark” for evaluating such a claim is “whether
counsel’s conduct so undermined the proper functioning of the
adversarial process that the trial (or capital sentencing hearing)
cannot be relied on as having produced a just result.”

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2. Two-Prong Test
a. Counsel’s performance must fall below an objective standard
of reasonableness;
i. This is a totality of the circumstances test concerning the
prevailing professional norms [e.g, ABA standards].
ii. Strong presumption that counsel’s conduct falls within
the wide range of reasonable professional assistance.
1. Attorney may make strategic decisions.
b. The defendant must be able to affirmatively prove the
deficient performance prejudiced the defense.
i. The defendant must establish that there is a reasonable
probability that, but for the attorney’s poor performance,
the result of the proceeding would have been different.
1. Reasonable Probability—a probability sufficient
to undermine the confidence in the outcome.
iii. United States v. Cronic—Rejection of the “inferential approach” to effective
assistance of counsel claims for inexperienced attorney.
1. Presume if…
a. Denial of counsel—the accused is denied counsel at a critical
stage of his trial.
i. Constructive denial?
b. An attorney completely fails to oppose the prosecution’s case
there will be a presumption of prejudice.
iv. Bell v. Cone—Counsel’s failure to present mitigating evidence or to make a
closing argument at a capital sentencing proceeding was properly held not to be
ineffective.
1. The attorney must completely fail to oppose the prosecution’s case to
obtain presumption of prejudice stated in Cronic.
v. Florida v. Nixon—Counsel’s failure to obtain the defendant’s express consent to
a strategy of conceding guilt in a capital trial does not automatically render
counsel’s performance deficient.
1. Not the functional equivalent of entering a guilty plea for the defendant.
vi. Nix v. Whiteside—A lawyer is immunized from a Sixth Amendment “verdict” of
inadequate representation if she acts in conformity with recognized ethical rules.
1. An attorney may make the decision to be ethical even if it puts the client
in a worse position.
3. Right to Jury Trial—“In all criminal prosecutions, the accused shall enjoy the right to a speedy
and public trial, by an impartial jury of the State and district wherein the crime shall have been
committed….”
a. Factual Application:
i. Duncan v. Louisiana—“Trial by jury in criminal cases is fundamental to the
American scheme of criminal justice.”
1. A jury must be provided for any non-petty offense.
a. This means a potential penalty of greater than 6 months.
2. It serves as a check on the arbitrary power of government.
ii. Williams v. Florida—A 6-person jury in a criminal trial will be sufficient to
satisfy the 6th Amendment.
iii. Apodaca v. Oregon—The verdict in a criminal trial does not have to be
unanimous unless it is a capital case.
1. However, the verdict must be at least 9 to 3.
2. Verdicts in a 6-person jury must be unanimous.

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4. Right to a Speedy Trial—“In all criminal prosecutions, the accused shall enjoy the right to a
speedy and public trial….”
a. Factual Application:
i. Barker v. Wingo—The right to a speedy trial “is generically different from any of
the other rights enshrined in the Constitution for the protection of the accused.”
1. A defendant being denied his right to a speedy trial will result in a bar to
prosecution and a dismissal of the indictment.
a. I.E. The defendant is never going to trial.
2. To evaluate whether a defendant’s right to a speedy trial has been
violated, look to the totality of circumstances:
a. What was the length of delay?
i. There must be some trigger for this prong.
b. What was the reason for the delay?
c. Did the defendant assert his right?
d. Did prejudice to the defendant result?
ii. Doggett v. United States
1. Applying the Barker Balancing Test:
a. The prolonged period between indictment and arrest (6 years)
will increase that the possibility that the defense will be
impaired.
i. Excessive delay presumptively prejudices the defendant
without concrete proof of prejudice.
iii. United States v. Lovasco—Overturned a lower court’s ruling that the defendant’s
rights were violated where he established actual prejudice (witnesses died during
period of delay). The government’s explanation for the 18-month delay from the
crime to the arrest was a desire to continue investigation notwithstanding the
presence of sufficient evidence to support the charge.
1. This case decided that a defendant has no constitutional right to a speedy
arrest.
a. General investigative delay is not going to cut it.
b. Speedy Trial Act of 1974
i. Establishes specific time limits within which the trial and certain other steps must
commence in a federal prosecution.
1. There are excludable delays.
a. In Michigan, trial must commence within 180 days or else the
defendant will get bonded out.

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EQUITIES & REMEDIES

Professor Richard Henke, Michaelmas Term 2011

CLASSIFYING REMEDIES—remedies can be categorized by their function (what they do) or by their
form (how they are worded). [Substitutionary Relief (damages/money) v. Specific Relief (injunction)]
1. Compensatory Remedies—designed to compensate the plaintiffs for the harm they have
suffered.
2. Preventative Remedies—designed to prevent harm before it happens, so that the issue of
compensation never arises.
a. Coercive Remedies
i. Injunction—a personal command from a court to litigants, ordering them to do or
to refrain from doing some specific thing.
ii. Specific Performance Decree—ordering defendants to perform their contract
(specialized form of injunction).
iii. Other—writs of mandamus, prohibition, and habeas corpus (legal remedies)
b. Declaratory Remedies—authoritatively resolve disputes about the parties’ rights, but
they do not end in a personal command to a defendant (like a court deciding which party
owns a disputed piece of property).
3. Restitutionary Remedies—designed to restore to the plaintiff all that the defendant gained at the
plaintiff’s expense, thereby preventing unjust enrichment.
4. Punitive Remedies—designed to punish wrongdoers.
5. Ancillary Remedies—designed in aid of other remedies (e.g., costs and attorneys’ fees)
_____________________________________________________________________________________

COMPENSATORY DAMAGES (PAYING FOR HARM)

1. Vocabulary of Compensatory Damages
a. General/Direct Damages—those damages that flow directly and necessarily from the
breach of contract or tort.
i. Contract Case—direct loss from breach; expectancy; benefit of the bargain; lost
profit.
ii. Personal Injury Tort Case—non-economic = pain and suffering; emotional
distress [subjective]; hedonic/quality of life damages. [Not subject to tort
reform]
iii. Tort in Chattel—damage to chattel
b. Special/Consequential Damages—damages that naturally and proximately resulted
from the wrong, but are a consequence or incident to the breach of contract or tort (see
more below Section 5).
i. Contract Case—consequential loss, often based upon reliance that the contract
would be performed (ex. damages to business reputation).
1. Recoverable if proximately caused by breach; problems of remoteness,
lack of foreseeability.
ii. Personal Injury Tort Case—economic loss = medical and hospital expense; lost
wages [objective]
iii. Tort to Chattel—what was lost as a result of the harm? See Hatahley.
2. Basic Principles—compensatory damages are substitutionary.
a. Hatahley’s Rule—the fundamental principle of damages is to restore the injured party as
nearly as possible to the position he would have been in but for the wrong.
b. Rightful Position Standard—the position he rightfully would have come to but for the
defendant’s wrong.

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c. One-Satisfaction Rule—the plaintiff may be entitled to judgment on multiple theories

and against multiple defendants, but the plaintiff cannot recover the same item of damage
more than once.
i. Pro Rata (D pays only his % of fault; % fault = % verdict obligated to pay)
ii. Pro Tanto (settlement credit, then D pays entire remainder of verdict)
d. Palsgraf v. Long Island Railroad Co.—The tortfeasor is responsible only for injuries
that are the direct, natural, and proximate result of the tortfeasor’s actions, and that the
parties would have foreseen, contemplated, or expected.
3. Measuring the Value of the Rightful Position—familiar damage measures include the value of
property taken or destroyed, the difference between the value of property before damage and the
value after damage, and the difference between the contract price and the market value of
property promised but not delivered.
a. The “Lesser of Two” Rule—a plaintiff whose property has been injured may recover
the lesser of the diminution of the property’s market value or its replacement cost. This
rule applies even when the property in question has been completely destroyed.
i. Diminution of Fair Market Value—the difference in price at which the property
would change hands between a willing buyer and a willing seller, neither being
under any compulsion to buy or sell and both having reasonable knowledge of
relevant facts.
1. Rebuttable Presumption—Generally, a recent sale price for the subject
asset, negotiated by the parties at arm’s length, is the “best evidence” of
its market value, but a party may introduce evidence to rebut.
ii. Replacement Cost—the cost of replacement or repair in contexts where
diminution in market value is unavailable or unsatisfactory as a measure of
damages.
1. Where expenditures to restore or to replace to pre-damage condition are
sued as the measure of damages, it must be reasonable (not only the cost
but also replacement/reconstruction itself must be reasonable).
2. Controversy—a plaintiff that wants to use its property rather than sell it,
awarding less than replacement cost forces the plaintiff to finance
premature replacement and fails to make the plaintiff whole.
iii. Specialty Property Exception—whether the use to which the property is put at the
time of the tort is a unique use, suitable only to the owner, and without an
ascertainable fair market value (e.g., churches, hospitals, and places for non-
profit organizations), then use reasonable replace/restore cost.
b. Loss of Use—loss-of-use damages do not run forever, but for a reasonable period of time
in which the property could be replaced.
i. A majority of courts would now award prejudgment interest on the award of
market value. Interest is commonly viewed as an alternate measure of the value
of loss of use.
c. Damages in Fluctuating Market of Value—the standard rule is to value property at the
time and place of the loss in tort cases, or at the time and place for delivery in contract
cases. A large number of states award the highest value between the time of the wrong
and the time of trial. The New York/Federal Rule gives the plaintiff the highest value
between the time he learned of the loss and a reasonable time thereafter in which he could
have replaced the property.
i. Crops are valued at the time of harvest. Decatur v. Young.
4. Expectancy and Reliance as Measure of the Rightful Person
a. Three “Interests” in Contract Remedies—the question is what is the rightful position:
the position plaintiff would have occupied if she had never made the contract
(compensating only the reliance interest); the position the plaintiff would have occupied

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if the contract had been performed (compensating the expectancy interest); or, restore the
defendant to the position the defendant occupied before the contract.
i. Expectancy Interest—the value of the plaintiff’s entitlement under the contract.
ii. Reliance Interest—includes the expenditures made in reasonable reliance on the
contract.
iii. Restitution Interest—prevent unjust enrichment
b. Occasional (one-time) Buyer v. Dealer (inexhaustible supply)—dealer gets the
presumption that there would be another sale. See Neri v. Retail Marine Corp.
5. Special/Consequential Damages—those damages that naturally and proximately result to the
injured party from the defendant’s wrongful act (also, secondary or derivative losses arising from
circumstances that are particular to the parties). These must be specifically plead and proven.
a. The Meinrath (Direct-Damages) Rule—all damages for delay in the payment of money
owing upon contract are provided for in the allowance of interest, which is in the nature
of damages for withholding money that is due (i.e., no special damages; only money plus
any interest).
i. Exception—Note 4 (pg. 62), State Farm v. Campbell, involving insurers and bad-
faith refusal to settle. The insured has no claim merely for failure to pay or delay
in payment. But if the insurer refuses or delays in bad faith, knowing that it is
liable, plaintiff can sue not only for interest but also for consequential damages,
including emotional distress, and for punitive damages.
b. The Spring Motors Rule—commercial buyer seeking consequential damages from
commercial seller and others in distributive chain is governed by the UCC, not common
law rules/tort law (including strict liability and negligence).
i. Don’t need privity to recover for direct economic loss. Parties are free to waive
consequential damages; disclaimers of consequential damages in a case dealing
with consumer goods are prima facie unconstitutional.
ii. Equitable Discovery Rule—tolls the statute of limitations until the date that the
injury is discovered. Does NOT apply to the UCC; statute of limitations starts to
run from the date of delivery.
c. Contracts Case—cases involving contracts between parties of equal bargaining power
should be reigned in closely because the parties can plan for loss in a contract; must be
reasonably contemplated at the of the contract formation.
i. Contracts Cases Dealing with Property Damage—special damages are awarded
to compensate the plaintiff for harms or losses resulting in consequence of harm
to the very thing to which the plaintiff is entitled.
d. Torts Case—different from contracts because a tort is not anticipated. So long as there
is causation, compensatory damages open more widely.
i. Personal Injury Cases—special damages are economic loss, including –
1. Time loss (lost wages, loss of earning capacity);
2. Medical expenditures and other expenses incurred; and,
3. Pain and suffering and other non-economic losses.
e. Hostility/Skepticism Towards Consequential Damages in—
i. In Contracts – Parties could have planned for contingencies
ii. Too speculative, too remote
6. Limitations of Compensatory Damages—“Many rules limit damages, often in ways that limit
plaintiff to less than her rightful position. These limits are closely related to distinctions between
[general] and [special] damages. The primary tools for restricting recovery of [special] damages
are (1) contractual limitations on remedies, and (2) rules about avoidable consequences,
remoteness, and uncertainty.”
a. Liquidated-Damages Clause— Generally speaking, parties are free to enter into
contracts that limit or specify damages in the event of breach. The parties’ freedom of

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contract, however, might be subject to challenge. A Liquidated Damages Clause is an

attempt by two contracting parties to anticipate and define the extent of consequential
damages that would be paid/allowed if there was a breach.
i. When a court reviews it, they primarily inquire if it is reasonable or a cheap
disguise for an unenforceable penalty; factors to determine include…
1. The anticipated loss—is the liquidated damages figure reflective of
actual loss or is it just some arbitrary number;
a. If capable of ascertaining damages and there is a rational
relationship between the actual damages and the liquidated
damages, then more likely to uphold clause.
2. At the time of breach, how difficult is it to quantify the loss?
a. If difficult, than better shot of having clause upheld.
3. The relationship between the parties—were the parties of equal
bargaining power or is this unconscionable overreaching; and,
4. Is there one liquidated damages amount to cover anything and
everything, or did the parties consider different figures for different
consequences.
ii. Common Challenges
1. Lack of meaningful assent
2. Exclusive remedy that fails its essential purpose
3. Liquidated damages that are punitive
iii. Overbroad Clauses—where a contract states several obligations of different
importance, and the liquidated-damage clause provides the same liability for
breach of any of them, the clause is a penalty and not a reasonable attempt to
estimate damages (“one-size fits all” clauses will most likely not be upheld).
iv. Unconscionability Doctrine—Notes 4,5 (pg. 78), oppression may be greater risk
for consumers and for entities much smaller than their contractual partners. An
economic debate lies where parties voluntarily enter into a contract with a
liquidated-damage clause, in the absence of unconscionability, these clauses
should be upheld (instead of pain-staking analysis as to reasonableness).
b. UCC Provisions
i. 2-316—disclaimers put on contracts by companies as long as they’re
conspicuous and understandable.
ii. 2-715—provides that the consequential damages a buyer may recover are those
that “could not reasonably be prevented by cover or otherwise.”
1. “Cover” is defined in §2-715: the buyer may ‘cover’ by making in good
faith and without unreasonable delay any reasonable purchase of or
contract to purchase goods in substitution for those due from the seller.
iii. 2-719—allows companies to disclaim and limit consequential damages
(remember a limit on consequentials on consumer goods is prima facie
unconstitutional)
iv. 2-607—Notice of Breach—when you’re injured by a defective product, you must
give manufacturer notice of breach within a reasonable time.
v. 2-725—four-year statute of limitations of UCC, starts upon delivery of goods.
c. Avoidable Consequences/Duty to Mitigate—the basic principle is that there is no
recovery for losses that a reasonable person would have avoided. If there are two equally
plausible courses of conduct, the breacher cannot argue that the non-breacher failed to
mitigate just because he chose one that didn’t work out as well as the other one might
have. See Groves (no Monday-morning quarterbacking; hindsight is 20-20).
i. Employment Cases—does someone have to take another, lower paying job if
they are fired? How closely related of a job do you have to take?

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1. The law requires the claimant to use reasonable diligence in finding

other suitable employment. Although the un- or underemployed claimant
need not go into another line of work, accept a demotion, or take a
demeaning position, he forfeits his right to backpay if he refuses a job
substantially equivalent to the one he was denied. Ford Motor Co. v.
EEOC.
ii. Personal Injury Cases—use phrase “avoidable consequences”
1. HYPO—If plaintiff makes a claim for permanent damages and defendant
says that had plaintiff done a certain surgery, he’d be 80% recovered
a. Plaintiff cannot recover permanent damages if there is a
reasonable procedure that he could have had to lessen his injury.
b. Defendant bares the burden of proof (i.e. an affirmative
defense) in showing that an reasonable person in plaintiff’s shoes
would have undergone that procedure, considering
i. The risks involved;
ii. How costly was it; and,
iii. Does plaintiff have special fears that would not make
him do it.
2. Do not confuse duty to mitigate with comparative fault—
a. Comparative fault = pre-accident conduct (comparing plaintiff’s
fault with the defendant’s fault, and apportioning percentage of
fault among them)
b. Duty to mitigate = post-accident conduct (focus on conduct the
plaintiff does not engage in)
iii. Property & Landlord/Tenant Cases—common law rule says there’s no duty to
mitigate; 42 states have adopted a duty to mitigate rule that requires them to
reasonably look for another tenant.
d. Offsetting Benefits—the basic idea: taking into account benefits caused by the wrong
(breach-induced benefits that don’t count)
i. Hypotheticals
1. An old employer can use a new job as an offsetting benefit
2. In a defamation case, the defendant can use increased notoriety that
result in money from new jobs he gets as an offsetting benefit (e.g.,
speaking at colleges/increased lecture fees, etc.), when the plaintiff
alleges lost income.
3. Having a child is an offsetting benefit to malpractice in sterilization
operation
4. Wrongful Death Cases—loss of consortium/society/companionship—
remarriage provides an offsetting benefit? Yes, in Illinois (but not to
offset loss of financial support).
ii. Collateral Source Rule Exception—If it is still in effect, it prevents a defendant
from getting a setoff (credit) from his tort liability for collateral sources that
plaintiff has acquired through private means while litigation is pending (typically
insurance, but can include donations). Public policy issue—do not penalize the
prudent individual who has insured against the wrong.
1. Tort reform has attacked this in many jurisdictions
2. Rights of Subrogation—pay insurance company back from tort award.
3. There is a fear of derailing the jury’s objectivity if you allow the
defendant to testify about the plaintiff receiving from a collateral source.
4. Practically, plaintiff never receives full amount of verdict anyway, when
factoring attorney’s fees.

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5. Some states have completely abolished the rule and give the defendant a
dollar for dollar credit for any collateral source funds (legislative
enactment instead of judicial decision)
e. Economic Harm Rule—this rule says that physical harm torts require physical harm to
plaintiff for recovery of any incidental economic losses—i.e., plaintiff cannot recover in
tort for pure (or indirect) economic harm unless the applicable tort theory is aimed at
preventing pure economic harm (e.g., fraud; attorney malpractice). Sometimes,
formalistic application of the rule would have anomalous consequences, and thus are
exceptions to the rule. See, e.g., Pruiit (toxic tort causing physical harm to marine
wildlife only).
i. In order to recover economic harm in tort setting, plaintiff must show personal
injury or property damage, and may not recover for purely economic losses.
ii. Pruitt Case—Defendant negligently dumped in lake; court cut off liability at
waters edge, but gave fisherman recovery for economic loss by holding that they
had a “constructive” property interest in the fish that were killed.
iii. Note—intentional and reckless tortfeasors are liable for a broader range of
consequences vs. negligence (as conduct gets worse, culpability for harm
increases)
iv. Other Application of Economic Harm Rule—commercial entity sues another
commercial entity for economic harm; the rule prevents him from recovery in
tort, and forces him to look at the UCC for a way to recover for economic loss
(this is a majority view; the minority says that the plaintiff can sue in tort)
1. Accompanying Property Damage? If a component part does damage to
the rest of the product in which it is installed, that is property damage
and recoverable in tort.
v. Exception to the Rule—professional malpractice cases because in most cases like
this, there is never any physical impact/injury
vi. Evra Case—plaintiff sues bank for economic loss for negligently failing to do a
wire transfer because they lost the fax; court denied relief stating that the bank
should’ve been put on notice prior of the special circumstances—a general
foreseeability of potential harm from losing faxes is not enough to recover
special damages and the result should be born by the party who was better able
to avert the damage but failed to do so.
f. Proximate Cause/Foreseeability
i. Tort—Proximate cause is a limitation on the scope of liability often couched in
terms of either general foreseeability, or the scope of harms defendant risked.
1. Note that in the context of economic torts (including statutory torts like
RICO violations and securities fraud) the proximate cause limitation has
recently been couched in terms of directness—e.g., only direct victims of
a securities fraud can recover.
2. Note also that in the securities fraud context, even the direct victim might
encounter a proximate cause issue, dubbed “loss causation”—e.g.,
there’s no “loss causation” when a fraud induces a purchase of stock, the
value of which goes down for some unrelated reason.
ii. Contract—The same type of limitation on the scope of liability in contract is
often couched in terms of specific foreseeability.
iii. Note—Some cases blur the distinction between tort and contact. See, e.g., Evra.
Our book says that perhaps the relevant distinction is between wrongs that cause
personal injury versus those that cause economic loss.

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1. One rationale for insisting on more specific foreseeability in contract is

that contract liability is based on agreement, and defendants are entitled
to know what liabilities they are potentially incurring
a. It is commonly said that tort defendants have more extensive
liability than contract defendants.
iv. RESTATEMENT 3rd—negligent defendants are liable only for “those harms that
result from the risks that made the actor’s conduct tortious. An actor is not liable
for harm when the tortious aspect of the actor’s conduct was a type that does not
generally increase the risk of that harm.
g. The Per Diem Argument—counsel for plaintiff breaks down physical and mental
suffering down to days, hours, or even minutes, sets a value on each unit, and multiply it
by the total number of unites that the pain and suffering has lasted and may be expected
to last.
h. Problems in Evaluation
i. Wrongful Death Measure of Loss—all American jurisdictions provide funeral
and burial expenses and some measure of compensation for the financial support
that decedent would have provided to dependents. (“Wrongful death is about
dependency”)
1. 3 Measures of Pecuniary Loss
a. Loss to Dependents: Those who are dependent on the decedent
continue to receive the support if he hadn’t died.
i. What is paid: Things that the decedent would have
provided “money” to the dependents.
ii. This unfairly impacts the beneficiaries who were either
very young or very old.
b. Loss to the Estate: This mainly looks at what the victim would
have saved from his earnings during his lifetime (Less) what his
expenses would have been.
i. This does not include what have would have been left to
the estate by inheritance, etc. This only considers
income.
ii. This unfairly impacts the beneficiaries who were either
very young or very old.
c. Loss of Inheritance: If there is a surplus beyond what would
have been spent by his dependents is given to the dependents.
i. Generally you have to prove that you would have
inherited in order to recover.
2. Difficult categories
a. Children: Pecuniary Loss
i. A small majority permits dependents to recover for loss
of “society,” which may include love, affection, care,
attention, companionship, comfort, and protection (fall
under pecuniary loss).
ii. Quality of relationship with parents may determine the
jury award, positively and negatively (has been held to
be admissible and inadmissible)
b. Adults without dependents (not worth that much).
i. Minority View—parents unable to recover absent
showing of financial dependency.
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a. Remarriage (should not be admissible as a matter of public

policy).
4. Reflection on this notion of money as a poor substitute and the 9/11 fund.
i. Emotional Distress Damages—These are only allowed in very specific circumstances
i. You never get these in breach of contract action except bad faith refusal to pay
on insurance contract
ii. In Tort
1. These are given anytime there is personal injury (physical manifestation)
2. May recover for intentional torts
3. These are never given when there is merely property damages
4. These are given for intentional infliction of emotional distress
5. Emotional Distress damages are also awarded for mishandling dead
bodies
iii. Stand alone emotional distress damages in negligence actions are limited
1. Normally you do not get standalone emotional distress
2. Do not get recovery for emotional distress without injury to person
3. Exceptions
a. Special relationship that indicates an undertaking of the
defendant to plaintiff to stop emotional distress.
i. EX: Women goes to the hospital to have a baby. Doctor
delivers the baby and drops the baby. Baby has a cause
of action, but no malpractice to mother. But
patient/doctor relationship gives emotional distress
b. Bystander Recovery
i. Zone of danger—Plaintiff can recover for emotional
distress when the plaintiff’s emotional distress stems
from being risk exposed to physical harm. Physical
conformation of emotional harm. Did not get physical
harm, just a change, but emotionally harm
c. Foreseeability/La Chusa Test
i. Sever emotional distress accompanied by physical
manifestation
ii. Contemporaneous proximity to the accident
iii. Close family relationship
1. Does not need to be at risk for harm
2. All must be met
3. Flexible
j. Substantive policy-based limits to damages
i. The remedy must not subvert substantive goal of the cause of action
ii. Constitutional Due Process Violations/ Dignitary Torts
1. Most common law intentional torts against the person are classified as
“dignitary torts”—i.e., torts aimed at protecting emotional and dignitary
interests. Generally, you do not get presumed damages. You only get
them if you can prove a loss. These are nominal damages. If you cannot
prove actual damages.
2. Most constitutional torts against the person are also classified as
“dignitary torts.” There are two important ways to assert these torts:
under 42 USC 1983, which says that one deprived of a federal right by
someone acting under color of state law is entitled to redress, and under
the “Bivens” case, which is a judicially created cause of action available
when a federal actor denies someone a constitutional right.

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3. With dignitary torts, they are incapable of proof. Proof of the tort itself is
generally enough to warrant damages. Plaintiff is entitled to damages for
intangible harms.
4. Measurement for tort/dignitary tort intangible harms
a. Measure intangible harms by a reasonable amount in light of the
evidence or an amount that would fairly compensate the plaintiff.
b. Absent actual harm you may recover substantial damages for
dignitary harm
c. For constitutional violation nominal damages absent proof of
actual damages
5. Examples
a. Defamation
i. Presumed damages upon proof of the defamatory
statement
b. Battery, Assault
c. False Imprisonment
d. Invasion of Privacy
e. Malicious Prosecution
f. Intentional Infliction of Emotional Distress (must prove damages
here though)
iii. Defamation Damages: Constitutional Limitations (substantive limitation)
1. Elements: Defamatory Statement, of Concerning, A Publication
a. Common law: Upon proof of those things, jury could award
damages- reputation damage could be presumed by proof of
these elements. (presumed damages after proof)
b. Now we have limitations on when jury can presume reputation
i. NY Times: Public officials and public figures may
recover presumed damages only upon proof of actual
malice (knowingly false statement) or actual harm by
clear and convincing evidence. Common law malice
(speaker/writer attempt to “destroy” the other person) for
punitive damages.
ii. Gertz: Private person in matter of public concern may
recover punitive or presumed damages with only proof
upon actual malice. Recover actual damage by showing
negligence, falsity, and actual injury (includes out of
pocket loss; humiliation; emotional distress)
iii. Dun: Private person with matter of private concern. No
actual malice necessary. Always presumed damages.
Prove common law elements of defamation.
k. Adjustments to Damages
i. Jury instruction protect awards
ii. Remittitur
1. Grant of a motion for a new trial on the issue of damages conditioned
upon the plaintiff’s refusal to accept a lesser amount
2. Standard for if the jury gave too much: If it was a result of passion or
prejudice on the part of the jury and if they acted contrary to the law. Do
the facts support the award.
3. If the judge offers a lower recovery amount. If you do not accept, you
get a new trial as to damages.

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a. Maximum Recovery Rule—the court is supposed to remit only to

the highest amount a jury could have awarded without triggering
a new trial.
iii. Additur
1. Grant of a new motion for a new trial conditioned upon the defendant’s
refusal to pay a greater amount
2. Not allowed in federal court (split as to constitutionality in state court)
3. If judge finds that the judgment was too low, he offers the defendant a
higher amount to pay. If he doesn’t agree than a new trial is granted to
the issue of damages.
l. Tort Reform: Caps on Damages
i. Legislative Enactments—about half of the state legislatures have passed laws that
in some way limit the amount of damages recoverable. Many are applicable only
to particular claims (e.g., medical malpractice claims, claims against the
government).
ii. Psyche of the juror
iii. Arguments against
1. 7th Amendment—cap on damages violates a right to a jury trial
2. Procedural Due Process—cap creates an “irrebuttable presumption” that
no mater what your case is like, the result is pre-ordained (which violates
due process).
iv. What the tort reform movement is trying to accomplish
1. Limit recovery for non-economic damages (pain and suffering)
2. Limit or abolish collateral source rule (tortfeasor gets set-off)
3. Limit or abolish punitive damages
4. Provide that judgments be paid over victim’s lifetime
5. To abolish joint and several liability and plaintiff bears loss for poor
defendant; other ways to deal with joint and several liability…
a. Many jurisdictions have thresholds of liability…
i. Unless defendant gets hit with threshold money he is
only severally liable
ii. Example: if defendant is 25% liable (lower than the
threshold) he’s only severally liable; if he’s 35% liable
(over the threshold) he can be held jointly liable.
6. Let defendant get attorney fees from plaintiff’s attorney for frivolous
claims
7. Limit rates charged in contingent fee agreements
8. To shorten statute of limitations or accelerate it from the point it runs and
also attack the equitable discovery rule.
_____________________________________________________________________________________
PUNITIVE DAMAGES
1. Common Law Considerations
a. When, how, for what purpose, etc…
i. Standards for Imposition—For outrageous; gross negligence; willful/wanton
disregard/reckless indifference for the rights of others/ safety.
ii. Goal of punitive damages is to punish and deter
iii. Most jurisdictions – burden to prove by clear and convincing evidence
iv. Factors to weigh: degree of reprehensibility, defendant’s wealth/financial
situation, amount of compensatory damages

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v. Jury Instructions—even with meticulous guidance, juries may still get angry and
just throw money out there (cannot guarantee a “good” result)
1. The only way to ensure against unpredictability and run-away nature is
to adopt a “hard-ratio cap” = 1:1 (only applies to federal maritime cases)
vi. Punitive damages are not available against municipalities
vii. Tort reform: elevating burden of proof, placing caps on awards (including ratio
caps)
viii. Real value is the threat of punitives; they’re seldom paid in full (remitted)
b. Vicarious Liability (easily part of punitive damages exam essay)—Should principal
be liable for punitive damages as a result of his agent’s acts?
i. Restatement 2d – Yes, if (1) principal ratifies or approves of the agent’s acts; (2)
the principal was reckless in employing the unfit employee; or, (3) agent
employed in managerial capacity and acting within the scope of employment
c. Tort Reform
i. Elevated burden of proof for plaintiff = clear and convincing evidence
1. Colorado requires proof beyond a reasonable doubt
ii. Caps—adoption of ratio caps; typical range is 3:1 or 2:1. Since State Farm,
number of states have adopted ratio caps. Does that defeat the purpose of
punitive damages?
d. Problem of punitive damages in Repetitive/Mass Tort cases
i. Issue – if you are a defendant hit for punitives over and over again, is there some
point at which it becomes an unconstitutional deprivation of property?
ii. 3rd Circuit said “no,” but a majority believes that there is a limit; no one has given
one
e. Punitive Damages and Class Actions—FRCP 23(b)(3) and 23(b)(1)(B)
i. FRCP 23(b)(3) – common questions of law/fact predominate over claims of
individual causes of action (if yes, plus commonality, numerosity, and typicality,
them more efficient to certify a class and solve the issue all at once, assuming
that too many do not opt out)
ii. Situations where this can work – accidents that were catastrophic events and
many people were simultaneously hurt (toxic tort, etc.)
iii. FRCP 23(b)(1)(B) – to get certified, you have to prove to the court that you have
limited funds
f. Use of state funds
i. Some state tort reform acts have made a share of punitive damages payable to the
state.
ii. Raises issues of unconstitutional taking of property.
g. Requirement of underlying compensatory damages—Assume compensatory damages
are a necessary prerequisite to punitive damages. Some jurisdictions require proof of
defendant’s financial wherewithal; jury cannot determine number without understanding
of the defendant’s financial situation (Never admission in compensatory trial, but fair
game for punitive).
2. The Due Process Clause of the Constitution is the source of the most notable modern day
limitation on punitives because it applies to all claims—federal and state. There are actually two
limits to consider here.
a. The procedures used to award punitives must comply with due process. For example, it
would violate D’s due process rights to instruct a jury to award a sum aimed at punishing
D directly for harms D caused to persons who are not parties to the lawsuit. See Philip
Morris.
i. Procedural due process issues: Exacting jury instructions; de novo review by
trial court; de novo review by appellate court.

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b. The amount awarded also must comply with due process. More specifically, the amount
awarded cannot be grossly excessive. A judge reviewing a verdict for gross
excessiveness is supposed to conduct that review de novo, and consider three guideposts:
reprehensibility, proportionality, and penalties authorized in comparable cases.
3. Constitutional Limitations on Punitive Damages—BMW, Inc. v. Gore established three
“guideposts” in determining whether punitive damages are reasonable. State Farm v. Campbell
expounded upon these considerations.
a. Degree of Reprehensibility—the most important indicium of the reasonableness of a
punitive damages award is the degree of reprehensibility of the defendant’s conduct.
i. Considerations—whether the harm caused was physical as opposed to economic;
the tortious conduct evinced an indifference to or a reckless disregard of the
health or safety of others; the target of the conduct had financial vulnerability;
the conduct involved repeated actions or was an isolated incident; and the harm
was the result of intentional malice, trickery, or deceit, or mere accident.
ii. Limits—due process do not permit courts, in the calculation of punitive damages,
to adjudicate the merits of other parties’ hypothetical claims against a defendant
under the guise of the reprehensibility analysis (i.e., out-of-state conduct is not
allowed)
b. Ratio Between Harm, or Potential Harm, to the Plaintiff and Punitive Damages—
few awards exceeding a single-digit ratio between punitive and compensatory damages,
to a significant degree, will satisfy due process. Single-digit multipliers are more likely
to comport with due process, while still achieving the State’s goals of deterrence and
retribution.
i. For Exam (potential ratios)
1. 9:1 allowed if compensatory damages are reasonable.
2. Double digit ratio is okay if compensatory damages are nominal but
conduct is outrageous
3. If the plaintiff has received large compensatory award, ratio of 1:1 will
satisfy due process
c. Disparity Between Punitive Damages and Civil/Criminal Penalties for Comparable
Misconduct—look to State law to see what remedy/fines they impose in a similar setting.
Punitive damages are not a substitute for the criminal process, and the remote possibility
of a criminal sanction does not automatically sustain punitive damages award.
_____________________________________________________________________________________

INJUNCTIVE RELIEF—remedy in the form of an in personam court order, which directs the defendant
to act, or to refrain from acting in a specified way, and it is enforceable by the contempt power.
1. In personam—not limited by the jurisdiction of the court; can require defendant to do something
out of the court. If you had a legal remedy it is limited to the jurisdiction of that court.
a. Generally, to get equitable relief, the plaintiff must show that there is an imminent
threat of irreparable harm that money damages cannot remedy (equity will not act
if there is an adequate legal remedy)
2. Types of Injunctions
a. Preventive/Preliminary Injunctions—factors to consider are ripeness, scope (must be
as narrow as possible), contempt, and mootness.
b. Reparative/Permanent Injunctions—already a trial on the merits, but need more than
money; can have a companion action for compensatory damages.
i. Harm has already occurred, but we enjoin additional harm.
c. Structural Injunctions—school desegregation cases, housing disputes, etc.

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3. Issues of Ripeness and Mootness Concerning Injunctions

a. Ripeness Doctrine (going toward “imminent”)—before an injunction will issue, the
threat of injury must be ripe (a realistic threat of violation). I.e., there must be a
sufficient certainty that the plaintiff will be harmed by the violation.
i. A ripe threat is a real or substantial one, not an imagined or feared one. See
Almurbati. If the unlawfulness of the threatened harm is uncertain, the
requirement is not met. See Nicholson. Plaintiff may lack standing if harm is
threatened to others, unless plaintiff represents them via a class injunction.
b. Mootness Doctrine—the threat must not have been made moot by changed
circumstances.
i. Voluntary Cessation of Wrongful Acts—when a wrongdoer claims to have
voluntarily ceased the wrongdoing, a court will not automatically find the matter
moot. Various factors should be considered, such as defendant’s apparent
sincerity (or lack thereof), the effectiveness of defendant’s discontinuance in
preventing recurrence, and the character of defendant’s past violations.
1. The wrongdoer must show no reasonable expectation of repetition.
ii. Standard of Review—Abuse of Discretion (heavy burden on the
defendant/moving party)
1. To show it will not happen again (no reasonable expectation that the
harm will happen again) – substantially clear
2. Ripeness (plaintiff’s burden)
a. Propensity that defendant will do it again
3. Court will look at the nature of the conduct and weigh it against the
defendant’s guarantee that it will not happen anymore
a. US v. WT Grant—the court did not say that the actions were not
moot, but there was no abuse of discretion in the trial court’s
refusal to award injunctive relief.
4. Scope/Every Injunction Must State
a. Fed R. Civ. 65(d)(1): Every order granting an injunction and every restraining
order must . . .
i. State the reasons why it issued;
ii. State its terms of specifically (tailored to the violation); reasons for issuance must
be pled with specificity; and,
iii. Describe in detail- and not by referring to the complaint of other document- the
act or acts restrained or required. Scope must be specific
b. Scope of Injunction
i. Should be narrowly tailored to fit specific legal violation;
1. Even though an injunction is granted, it may not be excessive. It should
only cover the behavior that is within the scope of the violation. The
scope of the injunction should be in accords with the harm.
2. Broad: Burden not too hard on the defendant
3. Narrow: Fit the violation and give complete relief
ii. Provide complete relief; and,
iii. Crafted to meet the needs of the cases.
1. Humble Oil & Refining CO v. Harang: Here there was no potential of
irreparable harm because there was no proof that there was an imminent
threat of destruction or concealment of evidentiary documents before a
satisfactory order could be obtained.
2. Marshall v. Good year: Preventative & Permanent injunction. One
incident & proof of age discrimination. This court allowed a nationwide
injunction because now all of their operations are tainted because of a

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threat of contempt. It was too broad because there was no finding of

discriminatory company policy or practice. Injunction should fit the
violation, if it doesn’t you might have a ripeness problem.
3. Nicholson—Halfway House: Sought an injunction because of halfway
house for previous felons. Not ripe because there was no showing of a
threat (no right to exclude the half way house). It was just fears and
apprehension. They do have a right to be subjected to a half way house
if it is one where they could run around, be out at night, doing drugs, etc.
Fear alone is not good enough, no indication of a propensity.
5. Choosing a Remedy: Substitutionary or Specific? (only money damages or injunction)
a. Why might compensatory damages be inadequate?
i. Uniqueness: very specific facts; applies primarily to cases involving real estate,
including leases and sales of real estate, b/c damages are never adequate for loss
of real estate (includes timber and all things dealing w/ land); no two parcels of
land are the same.
ii. Incalculable Damages: when money damages are so close to impossible; also
look for an “intangible value” that the court feels is important enough to
preserve. See Continental Airlines.
1. “The injury defies calculation”
iii. Scarcity: in times of scarcity or shortage, specific performance will generally be
granted without a showing of uniqueness because the market is out of whack
(note: courts will enforce a contract even if it’s inefficient if the moral goal of
enforcing agreements between parties is considered high). See Campbell Soup
(contract carrots case).
iv. Balancing Approach: most cases end here; courts can use this to get around the
confines of the other rules for preliminary injunctions; so talk about on exam—
see below [Subpart 6(a)(iii)] (only go through these for preliminary injunctions)
6. Preliminary (Preventive) Injunctions—Preliminary injunctions require notice and on-record
hearing with all parties (different from TRO). Purpose is to preserve the status quo before the
trial. A preliminary injunction may be framed so as to change the status quo.
a. Preliminary Injunction Test—According to Winter v. Natural Resources Defense
Council, Inc., a plaintiff seeking a preliminary injunction must establish that he has a . . .
i. Strong likelihood to succeed on the merits;
1. If the likelihood of success is high, plaintiff can get preliminary relief on
a lesser showing of irreparable injury and balance of hardships. If the
threatened irreparable injury is especially severe, plaintiff can get a
preliminary injunction of a lesser showing of probability of success.
a. Apply “sliding scale” for exam purposes.
ii. Likely to suffer imminent irreparable harm in the absence of preliminary relief;
1. Real and present danger; speculation is insufficient. I.e., there is a real
danger that the acts to be enjoined will occur.
a. EXAM—Should probably start with this factor first and address
the ripeness concerns as well, and then move on to the rest.
iii. The balance of equities tips in his favor; and,
1. Possibility of harm to plaintiff if injunction is denied.
2. Possibility of harm to defendant if injunction is granted.
iv. That an injunction is in the public interest.
1. Courts of equity should pay particular regard for the public consequences
in employing the extraordinary remedy of injunction.

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Judge Posner’s Preliminary Injunction Formula

P x Hp > (1 – P) x Hd
In other words, only if the harm to the plaintiff if the injunction is denied, multiplied by the
probability that the denial would be an error (i.e., P = probability that plaintiff will win at trial),
exceeds the harm to the defendant if the injunction is granted, multiplied by the probability that
granting the injunction would be an error.

7. Differing Standards of the Preliminary and Permanent Injunctions—permanent injunctions

usually come after there is an adjudicated wrongdoer and plaintiff will win unless the hardship to
defendant is substantially disproportionate to the benefit [If plaintiff fails at the preliminary stage,
he can go through trial on the merits and get a permanent injunction]. The balancing is much
less intensive at the permanent stage.
a. Requirements for Permanent Injunctions
i. Substitute probability of success with actual success;
ii. Plaintiff has suffered irreparable injury;
iii. Show inadequacy of legal remedy (present tense);
iv. Undue hardship has been a defense, with the burden on the guilty defendant to
show sufficient hardship to justify excusing him from complying with the law or
undoing the consequences of his past violation;
v. Look to public interest.
8. Injunction Bonds (Procedural Requirements/Safeguard)
a. Compensate the defendants for reparable harm for erroneous grant of provisional
injunction. (COMPENSATORY / NOT PUNITIVE); prove damage and reasonable
certainty wrong injunction (surety agreement)
b. The bond requirement is an attempt to eliminate reparable harms or to provide
reparations, when in spite of high standards for preliminary relief that relief proves to be
erroneous and causes harm to the defendant.
c. Elements/Look for…
i. Bond exists
ii. Wrongfully issued injunction
iii. Defendant suffered damages
iv. Does not have to be malicious
v. If we knew what we know now would the injunction be granted
vi. Courts may increase and decrease bond during the proceedings.
d. These hold that the (P) will be liable but only up to the amount of the bond which is
always set in advance.
i. Gives the person who brings the injunction a choice to bring the injunction, if
they could lose money on the bond.
ii. The cap that the plaintiff will have to pay if there is an erroneous injunction is
what the bond is.
iii. This is the (P’s) “non-wrong-doers requirement.”
e. Can the court waive the bond? What if P is so poor, no surety will give a bond?
i. FRCP 65(c) (p. 452) Sounds mandatory. Says, “no restraining order or
preliminary injunction shall issues except upon the giving of security by the
applicant, in such sum as the court deems proper . . .”
ii. But the federal courts, applying this rule, say the bond requirement is
discretionary. Why?
1. Rule clearly gives discretion in setting the amount at some nominal sum;
so waiving it altogether is not so different.

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2. Factors: potential loss to D; financial hardship to P; public importance of

the right being enforced. Idea: Don’t want the bonding requirement to
knock out certain plaintiffs, such as consumer groups, civil rights groups,
environmentalists, workers, etc.
f. What triggers liability on the bond?
i. An error in granting the injunction, period.
ii. FRCP 65(c) says that there’s liability on the bond if D was “wrongfully enjoined
or restrained.”
1. Cases: Means in hindsight, after perhaps a full trial and maybe even
appeals, it turned out that D should not have been preliminarily enjoined,
or that the preliminary injunction went too far.
iii. Exceptions for plaintiffs
1. These people don’t have to pay if they can’t afford it:
a. People with important rights cases
b. Charitable organizations
g. Can the trial court waive enforcement of the bond?
i. Courts Split. Some courts claim discretion not to enforce the bond even if the
injunction was wrongfully issued.
1. Minority: Broad discretion to waive enforcement, unless P brought the
case in bad faith.
2. Majority/ Coyne-Delany: Narrow discretion to waive enforcement.
Presumption is that the bond should pay, even if P sought the injunction
in good faith. Damages on the bond are compensatory not punitive.
3. Judge must have a good reason to deny compensation, e.g. failure to
mitigate.
h. Does the Plaintiff have any liability apart from the bond?
i. A few states impose such liability by statue. (approximately 4)
ii. Courts occasionally waive bond for plaintiffs who are plainly able to pay
damages. These plaintiffs are held liable as though they had filed bond in an
unlimited amount.
iii. Plaintiff is liable if there is some independent ground of liability such as
malicious prosecution, bad faith injunction, or abuse of process. Plaintiff may be
liable in restitution/damages for benefits conferred by the preliminary order.
i. If enforcement is not waived, what damages are recovered?
i. Courts generally measure damages by resort to the usual principles of damages
law: reasonable certainty requirement as to the fact and extent of damages.
ii. Voluntary settlementboth parties waive bond
9. Provisional Injunction—Temporary Restraining Order—an injunction that is issued prior to a
full trial on the merits.
a. Federal Rule—TROs are designed to prevent irreparable harm that will occur even
before a preliminary injunction hearing can be held. It requires a real threat of immediate
irreparable harm. TRO usually last just days. If extended, usually to allow a hearing on
preliminary hearing.
b. Ex Parte Issuance—Due Process and Fed. R. Civ. Pro. 65 put tight restrictions on
preliminary orders without notice.
i. A TRO will be granted where . . .
1. Clear threat of immediate irreparable harm
2. Inability to give notice
3. Unless extended TRO must terminate in 10 days
4. The plaintiff must show irreparable harm will otherwise result, and also
certify to the court in writing the efforts, if any that have been made to

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give the notice and the reasons supporting his claim that notice should
not be required
ii. Generally there is no record because there is no hearing and they are so
immediate. They are generally not appeal.
1. EXCEPTIONS
a. Find that the TRO will function like an ultimate decision on the
merits (Carroll)
i. Carroll v. President: Ex parte TRO to stop the White
supremacists from rallying. It restrained them for 10
days from holding rallies or meetings. A trial extended
the restraint for 10 additional months. If the TRO is not
available to be looked at there would be no way to look
at it. The problem is that it is a 1st amendment right
violation, so you must have notice and due process.
Therefore since it is a restraint on speech, you cannot
have an ex parte proceeding.
b. Find that the TRO is really a preliminary injunction (Sampson)
i. Sampson v. Murray: TRO said she could continue
employment until it was decided at a trial. It is over the
10-day limit, it would go on until the trial. Cannot make
it unappealable and of an unlimited time period. No due
process for the defendant. It is acting like a preliminary
injunction here, therefore it should be treated like it and
should be appealable.
iii. May be granted without written or oral notice to the adverse party or its attorney
if:
1. It clearly appears from facts in affidavit or verified complaint that
immediate and irreparable injury, loss or damage will result to the
applicant before the adverse party can be heard, and
2. Attorney certifies to the court in writing efforts, which have been made
to give notice and reasons that notice should not be required.
3. TRO not to exceed 10 days
iv. Fed R. Civ P 65(b)
1. (1) Issuing Without Notice. The court may issue a temporary restraining
order without written or oral notice to the adverse party or its attorney
only if:
a. (A) specific facts in an affidavit or a verified complaint clearly
show that immediate and irreparable injury, loss, or damage will
result to the movant before the adverse party can be heard in
opposition; and
b. (B) the movant's attorney certifies in writing any efforts made to
give notice and the reasons why it should not be required.
10. Structural Injunctions
a. Structural Injunctions: a series of orders, which attempts to remodel an existing social
or political institution to bring it into conformity with constitutional demands.
b. A long series of preventative and reparative injunctions in a single case presenting a
complex fact situation; each individual order is part of a continuing attack on a larger
problem
i. Particularly social problem
1. EX: School segregation cases/ jail cases

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ii. Injunctions cannot be tailored in a way that exceeds remedy

1. Swan: County maintained two districts one for white students one for
black students. Attendance lines must be redrawn and they must
specifically be drawn. Court concluded that the neutral lines couldn’t
undo the wrongful acts completely that in addition busing was mandated
to racially desegregation. Once they found a pervasive violation. The
court gave two huge orders. (Like Bailey)- broadly tailored
2. Bradley: Detroit schools. Court found unconstitutional segregation. DC
found that the nature of the schools that it was impossible to desegregate
the Detroit schools without the suburb schools. Order proposal for metro
desegregate plan. SC said there was no remedy in what they did. They
cannot remedy the segregated schools by going into the suburbs. (Like
Winston)- narrowly tailored to fit the violation
3. Jenkins: DC found that the school was segregated as a result of state
action. After Bradley the court ordered that the cities in the segregated
district new schools be constructed and there would be extra payment to
the teachers in the district. Within the segregated district you have new
schools and high paid teachers. SC said no, impermissive because you
cannot make the attractiveness to attract nonminority students from
suburbs.
11. The Right to Jury Trial—must have a legal issue to get a jury trial.
a. Two-Part Test (to determine if you have a 7th Amendment right to jury trial)
i. What cause of action does this current cause of action most closely resemble
historically before the merger of the courts, legal or equitable?
ii. What kind of remedy are they seeking (i.e., what is the nature of the relief)?
b. Henke says: #2 is much more important for the 7th Amendment determination and #1 is
not good for judges to do because as judges, they are not well suited to do it.
c. A potential defendant cannot deprive a potential plaintiff of jury trial by suing to enjoin
the potential plaintiff’s damage action or for a declaratory judgment that there is no
liability.
d. Federal Court Practice v. State Court Practice
i. Federal—Beacon Rule—any suit that could be filed at law must be, and if legal
and equitable issues or proceedings were joined in a single case, the legal issues
must be tried first, and to a jury.
ii. States courts applying state laws reject Beacon (by a ratio of 3:1)—if you have an
equity case with some ancillary legal issues, you might not get to a jury for those
legal claims; state courts retain the “clean-up jurisdiction” doctrine (judge sits as
jury for legal issues and decides equitable ones too).
12. Enforcement—The Contempt Power
a. Criminal Contempt—contempt is a criminal offense if done willfully.
b. Compensatory Civil Contempt
c. Coercive Civil Contempt
_____________________________________________________________________________________
DECLARATORY RELIEF—equitable remedy is sought in a circumstance in which there is some legal
uncertainty or underlying legal ambiguity and a person is fearful that if they act in the face of that
uncertainty or ambiguity, they will run afoul of the law. Therefore, they ask for a declaratory judgment
whereby the court will clarify or resolve the underlying ambiguity by making a declaration of the relative
rights of the parties involved.
1. To qualify for declaratory judgment, you must have a ripe, current case or controversy.
a. Sometimes depends on how well you characterize what’s happening in the pleadings

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2. Declaratory judgment may be denied if it cannot terminate the uncertainty or controversy.

3. Can you infer irreparable harm if declaratory judgment is violated? YES, or at least you would
have very weighty evidence that there is irreparable harm for a violation.
_____________________________________________________________________________________
RESTITUTION1
1. Introduction
a. The unjust enrichment cause of action—The remedy of restitution is available if
plaintiff can show that defendant was enriched at plaintiff’s expense. Think of this
prerequisite to restitution as plaintiff’s “unjust enrichment cause of action,” and think of
this cause of action as consisting of three elements . . .
i. Plaintiff lost or conferred a benefit;
ii. Defendant obtained a benefit; and,
iii. It would be unjust to let defendant keep the benefit.
b. The remedy of restitution—Restitution, again, is the remedy for the cause of action just
described. It’s a remedy measured by defendant’s gain (as opposed to plaintiff’s loss), so
it is NOT a category of “damages.” Instead, it’s a category of monetary recovery. The
measure of restitution depends on how much defendant benefited unjustly. A key factor
in measuring the benefit is the level of defendant’s culpability.
i. In other words, there is a tendency among courts to measure the benefit
conservatively if defendant acted innocently, see, e.g., Somerville v. Jacobs; to
measure the benefit liberally if defendant was a conscious wrongdoer or
breaching fiduciary, see, e.g., Olwell v. Nye; and possibly to measure the benefit
in some intermediate way for a defendant who acted with some intermediate
level of responsibility.
c. Historical labels—“Restitution developed through a number of more specific remedies
and causes of action: constructive trust, equitable lien, accounting for profits,
subrogation, rescission, indemnity, contribution, various forms of quasi contract, and
more.”
2. Application
a. Mistake (Sauer and Somerville)—“The remedy for unjust enrichment is restitution. A
person who pays money to another by mistake is entitled to restitution from the payee or
other beneficiary of the payment. This is true even though the mistake is due solely to
the payor’s ‘lack of care’ or ‘inadvertence,’ as well as where the payee shares in payor’s
mistake.” A person entitled to restitution can find a remedy in equity or at law depending
upon the circumstances of the particular case.
i. A transfer by mistake, or a transfer accomplished by tort, is not justified, and the
resulting enrichment is unjust.
ii. Mistaken Improver
1. How do we evaluate a benefit conferred upon one who never asked for
it?
2. Remedy is endorsed in Third Restatement (“buy-sell remedy”)…
a. Value of improvements through imposition of a lien; or,
b. Purchase the land less the value of the improvements.
3. Improvements v. Encroachments
a. In encroachment cases, there is no unjust enrichment. Remedy is
either remove encroachment or pay for the right to keep it.

1
Side note on restitution v. tort claim: compensation of plaintiff’s damages and disgorgement of
defendant’s profits are alternative remedies for the underlying tort.

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b. A claim to unjust enrichment arises when the mistaken improver

builds something with value independent of whatever is on the
mistaken improver’s side of the line—something that would
enrich the landowner if she were able to keep it without
compensation.
b. Unenforceable Contracts and Quantum Meruit (Anderson)
i. Quasi-Contract (Contract Implied-in-Law)—it is a non-contractual obligation
that is to be treated procedurally as if it were a contract. The essence lies in the
fact that the defendant has received a benefit which it would be inequitable for
him to retain, it necessarily follows that the measure of recovery in a quasi-
contractual action is not the amount of the enrichment, but the actual amount of
enrichment which, as between the two parties it would be unjust for one party to
retain.
1. SoL is generous for quasi-contracts.
ii. Quantum Meruit—(“as much as he has deserved,” measured by market value—A
measure of contract damages when there is an enforceable contract without a
specific price term; it is a measure of restitution when there is no enforceable
contract.
iii. Other Solutions for Unenforceable Contracts
1. Part Performance (historically equitable)—leading to specific
performance
a. Plaintiff must show . . .
i. Performance unambiguously refers to the contract; and,
ii. Detrimental reliance
2. Promissory Estoppel (historically legal)—leading to reliance damages
c. Disgorging the Profits of Conscious Wrongdoers—restitution is measured by the
largest measure of restitution rather than the smallest, allowing the plaintiff to generally
recover all the profits defendant earned as a result of the intentional wrongdoing (Olwell
v. Nye). [Do not argue full disgorgement and punitive damages for exam purposes]
i. Accounting for Profits—the defendant has the burden of proving its costs
(Maier).
1. Right to Jury Trial?—since it is an equitable remedy, some felt there
would not be a right to a jury trial. However, there would clearly be a
right to a jury trial in accounting for profits in federal court and in states
that follow the federal rule.
d. Recission (if talking about recission about appropriate remedy, no need to discuss
whether it is a legal or equitable)
i. Fraud
ii. Substantial breach of contract
iii. Mutual mistake of fact
3. Restitutionary Rights in Specific Property
a. Constructive Trusts— Constructive trust is equitable form of restitution (no jury trial);
makes a wrongdoer a trustee of profits and plaintiff the beneficiary.
i. Constructive trust can be used to trace proceeds through a series of exchanges;
constructive trust attaches to the asset and can be imposed through a series of
transactions.
ii. Important advantages when defendants are insolvent: if trustee becomes
insolvent, whatever their holding for your benefit cant be touched by creditors
b/c it’s your property and you get priority in bankruptcy.

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iii. When you get an accounting for profits and you’re in fear that D might become
insolvent, you should ask the court for a CT (if D doesn’t, it doesn’t matter but if
he does and there is no CT, P loses and attorney can be liable for malpractice)
b. Equitable Liens—is a specific, equitable remedy that might apply when a benefit
defendant unjustly obtained can be traced into property held by defendant. The remedy
takes the form of a money judgment in the amount of the benefit, secured by a lien
against the property into which the benefit is traced.
c. Subrogation—(substituting one party’s rights for another’s) is an equitable remedy that
usually applies when (1) plaintiff, the “subrogee,” pays a debt that was owed to someone,
the “subrogor”; (2) the person who owed the debt, the “obligor,” was primarily liable,
and plaintiff was not; and (3) plaintiff did not make the payment voluntarily. When the
remedy applies, plaintiff is “subrogated” to the rights of the subrogor.
i. Example—Insurance co steps in your shoes and sues with your rights
d. Replevin and Ejectment—specific, legal, and restitutionary remedies that allow the
plaintiff to recover possession of property from some in possession whose rights are
inferior to plaintiff’s.
i. Replevin—the remedy when plaintiff seeks to recover possession of a chattel.
ii. Ejectment/Quiet Title—remedy when plaintiff seeks to recover possession of real
property.
e. Trover—instead of getting back item, you get value of item taken instead.
f. Indemnity
i. Ex. manufacturing defect: all parties in chain of distribution are strictly liable; if
Kroger is liable for finger in tuna, they can argue indemnity from tuna company.
ii. As opposed to contribution, you’re saying in indemnity that your not even a
tortfeasor and you had to pay wrongfully
g. Contribution (interplay with joint and several liability)
i. Each defendant is severally liable for actual percentage of fault and each is
jointly liable for the whole so plaintiff can hold each liable for the whole
ii. Under contribution, defendant who paid more than his share can get contribution
from joint tortfeasor.
_____________________________________________________________________________________
ANCILLARY REMEDIES
1. Attorney’s Fees
a. American Rule—90% of cases, each side pays their own lawyer.
b. Fee Shifting—judges can use “fee shifting” to control vexing litigation
c. Reasonableness of Fees—reasonable number of attorney hours multiplied by a
reasonable hourly rate (factors for “reasonable”—look to PR), see Lodestar.
d. Relationship between damages covered and attorney’s fees—court said this should
only be one factor; in civil rights cases, the benefits are much more than actual award
could be and no one would take the case if they had to work on a contingent fee basis for
all the work they had to do.
i. Many personal injury tort plaintiff’s couldn’t litigate if there wasn’t contingent
fee arrangements (plaintiff’s lawyers have incentive to settle a case quickly)
ii. Defendant’s lawyers in a personal injury tort case are paid by the hour and have
an incentive to drag out the case.
e. The majority of fee shifting situations favors plaintiffs because business/defendants have
litigation costs built in as a cost of doing business (can spread the cost to consumers), and
it’s more common for plaintiff to be a one-time player that will be devastated by legal
fees.

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f.
Exceptions to American Rule
i. Civil rights cases (statutory exceptions);
ii. Contempt of court;
iii. Family law (divorce);
iv. Bad faith litigation;
v. Contract exception;
vi. Common-fund exception;
1. Where a case creates a common fund in which others will share, plaintiff
and attorney are entitled to fees from the fund; attorney files for fess ex
post; sliding scale fee structure works well, but it’s not about the lowest
bid but the most competent legal representation for the most reasonable
fee.
vii. Risk of non-payment
1. If case is more consuming than originally thought, some states allow the
attorney to file for an enhancement (not in federal system). Henke says
this is bad because assessing risk is what contingent fees are all about.
2. Contempt

B) Contempt:
1. Civil Compensatory:
• Ancillary to an injunction: injunction was issued & party continues to engage in proscribed
conduct (Ex: injunction to prevent patent infringement; D does it anyway, P seeks damages
in civil contempt)
• B/c ancillary to injunctions, there is no jury trial on the issue of damages; must show by
CCE to judge
• Minority of states reject this rule and P must file a new action for a jury trial on the issue of
damages; now std. is preponderance of the evidence (better)

2. Coercive Civil Contempt:

• 3 steps – (i) impose injunction; (ii) threaten fine; (iii) impose fine
• D must be given the opportunity to avoid the punishment by complying w/ the order (he in
essence controls his wallet and holds the key to the jail)
• Perpetual Imprisonment: can become punitive if no reasonable prospect of successful
coercion; then should let go

3. Criminal Contempt:
• Fixed and determined fine or jail sentence; probably prosecuted by a representative of the
state
• Beyond a reasonable doubt std and right to a jury trial
• Issue: Is this coercive civil contempt or criminal contempt?
- Look at the nature of the sanction, not the judge’s intent
- If it has a criminal component to it, we should err on the side of calling it
criminal for the protections it affords D (jury trial; higher burden)
• Collateral Bar Rule – cant attack an injunction after the fact, you must attack the validity of
the order before you defy it
- preemption issue (injunction violating the 1st Amendment)
- not applicable in civil contempt cases, only in criminal contempt

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EVIDENCE OUTLINE
Professor Anthony Flores, Michaelmas Term 2010
Major Areas: 1) Relevance, 2) Witness & Character, and 3) Hearsay
Minor Areas: 1) Authentication, 2) Best Evidence Rule, and 3) Privileges
OVERVIEW
1. Evidence Definition: the body of law regulating the admissibility of what is offered as proof
into the record of a legal proceeding (see Black’s Law Dictionary).
2. Types of Evidence
a. Testimonial—witness questioning and answering under oath (credibility)
b. Tangible Physical Evidence—exhibits
i. Real evidence – actual items involved in the case
ii. Demonstrative – items created for trial to help clarify testimony
c. Direct: evidence which, if believed, resolves a matter in issue
i. Example: I saw John hit his wife.
d. Circumstantial: evidence which, even if believed, does not resolve the matter at issue
unless additional reasoning is used to reach the proposition to which the evidence is
directed.
i. Examples: Character Evidence and Habit Evidence
_____________________________________________________________________________________

ROLE OF THE JUDGE

1. Purpose and Construction (Rule 102)—The court may place time limits for the presentation of
evidence provided such power and discretion is exercised fairly and efficiently (reduce
delay/expense)
a. Example: To curtail presentation of cumulative evidence in criminal tax fraud case, judge
placed time limits on various stages of the trial (see United States v. Reaves)
2. Mode and Order of Interrogation and Presentation (Rule 611)—The court shall exercise
reasonable control over the mode and order of interrogating witnesses and presentation of
evidence so as to (1) make the interrogation and presentation effective for the ascertainment of
the truth, (2) avoid needless consumption of time, and (3) protect witnesses from harassment or
undue embarrassment.
a. Example: To establish the chronology of the case, the court required the plaintiff to
testify first (see Stone v. Peacock).
3. Comments on the Evidence: federal judges may comment on the evidence presented at trial, but
cannot add or distort the evidence, and must use great care to not prejudice the litigants or their
cases.
a. Example: the court’s comment that the Defendant admitted to his participation in the
crime struck at the heart of the Defendant’s defense; it negated the Defendant’s claim that
he did not make the confession (see United States v. Yates).
4. Calling and Interrogation of Witnesses by Court (Rule 614)—the court is entitled to propound
questions pertinent to a factual issue that requires clarification. Questioning will not typically
result in reversal unless it affects the substantial rights of a party.
a. Calling by court—the court may call witnesses, and all parties are entitled to cross-
examine the witness
b. Interrogation by court—the court may interrogate witnesses, whether called by itself or
by a party
i. Example: reasonable limitations (see Crandell v. United States)
c. Objections—objections to the court’s calling or interrogating witnesses may be made at
the time of or at the next available opportunity when jury is not present.

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5. Limiting Instruction (Rule 105)—The court may decide to allow evidence with a limiting
instruction. A “limiting instruction” is when the judge tells the jury to use the evidence for only
certain reasons.
6. Erroneous Ruling (Rule 103)—an erroneous ruling is not an error unless it is a plain error
(obvious); or…
a. It affects a substantial right of the party AND
b. Party made a timely and specific objection AND
c. Party offered proof (told the court what the evidence was) AND
d. Make sure that the objection, offer, and ruling are on the record.
_____________________________________________________________________________________

RELEVANCE—OVERVIEW
1. Definition (Rule 401)—Relevant evidence means evidence having any tendency to make the
existence of any fact that is of consequence to the determination of the action more or less
probable than it would be without the evidence.
a. Fact that is of consequence—whether a fact is of consequence to a case turns upon the
requirements of the underlying substantive law.
b. Probative—to have probative value, evidence need not by itself prove the fact at issue.
i. Example: evidence of tops to women’s pantyhose found in defendant’s room
tends to identify defendant as perpetrator (see People v. Adamson).

2. Relevant Evidence Generally Admissible (Rule 402)—All relevant evidence is admissible,

except as otherwise provided by these rules or the Constitution, Act of Congress. Evidence that is
not relevant is not admissible.

3. Relevant Evidence May Still Be Excluded (Rule 403): Evidence may be relevant but still
excluded if its probative value is substantially outweighed by the danger of the following
counterweights…
a. Unfair Prejudice—evidence that would distort the fact-finding function of the trial by
allowing the jury to draw inferences that are improper, based on emotion.
i. Example: naming Defendant’s prior conviction crime was unfairly prejudicial
when element of present crime required only prior conviction known; offer to
stipulate is important for consideration (see Old Chief v. United States).
b. Confusion of Issues/Misleading the Jury
c. Waste of Time/Needless Presentation of Cumulative Evidence/Considerations of
Undue Delay
d. BALANCING TEST – “Probative v Prejudicial” (where the probative value and
countervailing factors are close, the judge should admit the evidence)
i. First, judge must determine whether the evidence has any probative value under
Rule 401.
ii. Second, judge will estimate the strength of the probative value.
iii. Third, judge then determines the strength of any counterweights under Rule 403.
iv. It is only when the probative value is substantially outweighed by the 403
counterweights that the evidence is inadmissible.
e. Evidence will NOT be excluded because of unfair surprise. The other side might be
granted a continuance if there is an unfair surprise. Never pick unfair surprise as an
answer as to why evidence should be excluded.

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JUDICIAL DETERMINATION OF CONDITIONAL RELEVANCY

1. Preliminary Questions (Rule 104)—allows the judge to make preliminary findings regarding
the admissibility of evidence
a. 104(a)—allows the judge to consider any underlying evidence (admissible or not) in
order to make a legal finding about the admissibility of an item of evidence in issue. This
includes having a conference with counsel outside the hearing of the jury.
b. 104(b) Relevancy Conditioned on Fact—requires the judge to allow the jury to decide
whether certain underlying factual conditions exists in order to make an item of evidence
relevant.
i. Allow this to occur only where there has been an initial showing that reasonable
jury could find by a preponderance of the evidence that the factual condition at
issue exists (see Huddleston v. United States).
LIMITATIONS ON RELEVANCE BASED ON POLICY
1. Subsequent Remedial Measures (Rule 407)—when measures are taken that would have made
an earlier injury or harm less likely to occur, evidence of that subsequent measures is not
admissible to prove…
a. Negligence;
b. Culpable conduct;
c. A defect in a product or its design; or
d. A need for a warning or instruction
e. But, the court may admit evidence for another purpose – such as impeachment (if
evidence has a “nexus between the statement sought to be impeached and the remedial
measure”), bias, or (if disputed) proving ownership, control, or feasibility of
precautionary measures
2. Compromise and Offers to Compromise (Rule 408)—the following is not admissible—by
either party—either to prove or disprove the validity or amount of a disputed claim or to impeach
by a prior inconsistent statement or a contradiction:
a. Furnishing, promising, or offering—or accepting, promising to accept, or offering to
accept—a valuable consideration in order to compromise the claim; and
b. Conduct or a statement during compromise negotiation about the claim—except when
offered in a criminal case and when the negotiations related to a claim by a public office
in the exercise of its regulatory investigative, or enforcement authority.
c. Exceptions—bias/impartiality/negating contention of undue delay/proving an effort to
obstruct a criminal investigation or prosecution.
3. Payment of Medical and Similar Expenses (Rule 409)—evidence of furnishing, promising to
pay, or offering to pay medical, hospital, or similar expense resulting from an injury is not
admissible to prove liability for the injury.
4. Plea Bargain Agreements in Criminal Cases (Rule 410)—if Defendant enters into proffer with
prosecution, and defendant ends up going to trial, statements made during these agreements can
be used (the admission of plea statements for impeachment purposes enhances the truth-seeking
functions of trials and will result in more accurate verdicts).
5. Liability Insurance (Rule 411)—can be used to show proof of agency, ownership, or control, or
bias or prejudice of a witness.
LIMITATIONS ON RELEVANCE BASED ON CHARACTER AND HABIT
1. Types of Character Evidence (Rule 405)
a. A person’s reputation in the community (what others in the community think about a
person’s character trait)
b. Witness’s opinion (what a witness personally knows about another person’s character
trait)

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c. Specific act evidence (the way a person has demonstrated a particular character trait
through that person’s actions on particular occasions)
2. Character Evidence Generally Inadmissible 404(a)—character evidence is evidence of a
person’s “propensity” to act in conformity with a particular character trait.
a. Exceptions (only apply in criminal cases?)
i. The “Mercy” Rule 404(a)(1)—the defense may raise a good character trait of the
defendant that is “pertinent” to the charge of the defendant at issue in the case.
1. E.g., D’s propensity for peacefulness in an assault case.
2. Under Rule 405(a), witnesses can only testify as to their knowledge of
the defendant’s reputation or their opinion of the defendant’s relevant
character trait.
a. But not as to any of the defendant’s specific act that form the
basis of their testimony.
ii. Rule 404(a)(2)—the defense may raise a bad character trait of the victim that is
“pertinent” to the charge of defense at issue
1. E.g., victim’s propensity for violence in an assault charge/self-defense
case.
b. Defendant must be the first one to “open the door” on character
i. 405(a)—Prosecutor can…
1. Cross-examine the defense witness by asking whether he has heard about
specific bad acts of the defendant that rebut the positive character
testimony
a. Must be in “food” (good) faith and may require a showing of
proof
2. Call their own witnesses to testify that the defendant has a bad reputation
for the trait in the question
ii. Prosecutor CANNOT ask about details of these acts nor imply that those acts are
true because to do so would create issues that are collateral to the testimony.
3. Other Crimes, Wrongs, or Acts Used for Non-Propensity Purposes 404(b)—past or
subsequent crimes, wrongs, or acts of a person can be used, in either a civil or criminal case, to
prove something other than character or propensity of that person.
a. “MIAMI COP”
i. Motive
ii. Identity (modus operandi, signature crimes)
iii. Absence of Mistake/Accident
iv. Mistake/Accident
v. Intent
vi. Common Plan or Scheme (modus operandi)
vii. Opportunity
viii. Preparation
b. The court determines the criteria for “other crimes” evidence
i. Must be relevant
ii. The evidence is relevant for a proper purpose other than showing the character or
disposition of the defendant (MIAMI COP);
iii. The proof that the acts were committed by the defendant by a preponderance of
the evidence;
iv. The probative value of the evidence is not substantially outweighed by the danger
of prejudice, misleading the jury, confusing the issues, or undue delay.
v. Upon request, court may provide a limiting instruction to the jury.

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4. Character as an Essential Element of Claim/Charge/Defense (Rule 405(b))—character

evidence is admissible, and it is admissible using extrinsic evidence in all three forms: reputation,
opinion, and specific instances of conduct, see Shafer.
5. Habit and Routine Practice (Rule 406)—habit evidence of an individual, or the routine practice
of an organization, is admissible. However, to be a habit, the action in question has to be a
specific, narrow, non-volitional, automatic response to a repeated set of circumstances.
a. It shows a stronger likelihood that a person acted in accordance with a particular way of
behaving because that person has done so repeatedly, almost automatically, in response to
a specific situation that occurs over a period of time.
b. One cannot be in the “habit” of being a careful or violent person.
c. Conflicting evidence goes to the weight of the evidence and not to its admissibility.
6. Victim’s Character in a Sexual Assault Case (Rule 412)
a. Rape Shield—typically, defendant cannot open the door on the victim’s character for
sexual behavior or sexual predisposition.
b. Admissible for…
i. Issue of identity (someone else was the source of the semen or injury to the
victim)
ii. Issue of consent (look at the past relationship between the accuser and defendant
concerns previously consented to sexual behavior)
iii. Constitution requires admissibility
c. Civil Cases—evidence admissible provided it survives 403 analysis.
7. Defendant’s Character in a Sexual Assault Case (Rule 413-15)—the government is allowed to
present propensity evidence of the defendant at trial. Judge can suppress based on Rule 403.
_____________________________________________________________________________________

WITNESSES
OVERVIEW/QUALIFICATION OF A FACT WITNESSES
1. Leading Questions (Rule 611(c))—question suggests the answer, allowing the answer to be
either yes or no. Allowed when questioning adverse/hostile party.
a. Allowed on direct examination when witness is hostile/adverse; preliminary or
undisputed, collateral matters; child witness; forgetful witness.
2. Cross-Examination (Rule 611(b))—limited to the subject matter of the direct examination and
matters affecting credibility of the witness.
3. Objections (Rule 611(a))—
a. Narrative—“anything else you would like to say” [don’t want them to ramble]
b. Asked and Answered—can you tell the jury just one more time what happened”
c. Non responsive—“I didn’t do anything, but Jenny got a gun”
d. Cumulative—“did you also see D shoot (after 3 witnesses)?” [Adding anything new?]
i. Maybe okay if testimony is corroborative
e. Assuming Facts Not in Evidence—when you saw D leave with a gun, probably in a hurry,
did you tell your son?”
f. Misstate Evidence/Misleading—expedite
4. General Rule of Competency (Rule 601)—every person is competent to be a witness unless
these rules provide otherwise. But in civil cases, state law governs the witness’s competency
regarding a claim or defense for which state law supplies the rule of decision.
5. Mentally Incapacitated Witnesses—whether it be substance abuse/medical/psychological
infirmity, individuals may be permitted to testify, provided the judge determines that the
individual is not so impaired that he cannot understand what the truth is and generally can
remember and explain events (see United States v. Roach).
a. Incompetent to stand trial does not mean incompetent to testify.

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6. Child Witnesses—there is no statutory threshold age below which a child is not permitted to
testify.
a. Generally, to be component, a child witness must be able to tell the difference between
truth, appreciate the duty to tell the truth, and a lie and be able to remember and
coherently narrate events (see Wheeler v. United States).
b. Issue—suggestibility
7. Previously Hypnotized Witnesses—viability of these individuals is not clearly defined by courts
or rules, NO PER SE RULE (see Rock v. Arkansas).
a. There are concerns about suggestibility and confabulation with unsubstantiated dreams.
Criminal defendants have been given some constitutional protection to use this kind of
testimony, but not necessarily available to a non-criminal defendant witness
8. Witness’s Religious Beliefs (Rule 610)—witness’s religious beliefs, or lack thereof, cannot be
used to attack or bolster general credibility.
a. But, may be used to possibly expose a particular bias (see Firemen’s Fund Insurance
Company v. Thien).
9. Judges as Witnesses (Rule 605)—presiding judge may not testify as a witness at the trial. A
party need not object to preserve the issue (if going to testify, judge should disqualify himself).
10. Jurors as Witnesses (Rule 606)— a juror cannot testify at trial via Rule 606(b) or internal
influences (mental process, insane delusions, boredom, headache, etc.),
a. Inquiry into the Validity of a Verdict/Indictment—(see Tanner v. United States) a juror
may testify about whether…
i. Extraneous prejudicial information was improperly brought to the jury’s attention
ii. An outside influence was improperly brought to bear on any juror (e.g. bribe,
threats, personal viewing of non-admitted evidence, bailiff statement);
iii. Clerical error (a mistake was made in entering the verdict on the verdict form).
b. Issue—co-juror threat (internal or external)
11. State’s Dead Man Statutes—diversity-based federal trials will recognize state “Dead Man”
statutes. Most often, these prohibit the testimony of a party or interested witness concerning any
tort, contract, transaction or communication with a decedent even though relevant to the lawsuit.
States will occasionally allow such testimony if it is corroborated.
12. Oath or Affirmation Requirement (Rule 603)—witnesses must be willing to declare that they
will testify truthfully by oath or affirmation. The witness simply needs to recognize the
importance of telling the truth (see United States v. Fowler).
13. Personal Knowledge Requirement (Rule 602)—generally, a witness can testify only to the
extent of their personal knowledge – that is, the extent to which they actually perceived (see/hear)
something first hand in the case (see McCrary-El v. Shaw) [LINKED WITH RULE 701]
a. Without Personal Knowledge  Objections: Foundation, Speculation
b. Not for Rule 703 – Expert Witnesses (allowed to speculate)
14. Writing Used to Refresh a Witness’s Memory (Rule 612)—(see Doty v. Elias), this rule gives
an adverse party certain options when a witness uses a writing to refresh memory;
a. While testifying; OR
b. Before testifying, if the court decides that justice requires the party to have those options.
c. Witness MUST testify from memory, they cannot read the writing to the jury.
15. Recorded Recollection (Rule 803(5))—when recollection can’t be refreshed, hearsay exception
IMPEACHMENT OF A WITNESS
1. FRE 607—any party may attack a witness’s credibility.
a. Impeaching a Party’s Own Witness—a party cannot call adverse witnesses on direct
examination solely to impeach them with a prior inconsistent statement because such a
statement used this way would constitute inadmissible hearsay (see United States v.
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2. Bolstering a Witness’s Credibility—a party may not “bolster,” or vouch for, the credibility of a
witness by putting on a second witness to testify that the first witness is a truthful person and is
telling the truth (see United States v. Rosario-Diaz).
a. Can only bolster AFTER the witness’s credibility has been attacked.
3. Character and Credibility
a. Rule 404(a)
b. Rule 404(b)
4. Witness’s Character for Truthfulness (Rule 608)—still use “probative v. prejudicial” test
a. Rule 608(a)—allows either party to attack the character for truthfulness of any witness
who takes the stand; allows a party to offer a second witness to testify that the first
witness has a bad reputation for being untruthful, or in the opinion of the second witness,
that the first witness has a bad character for truthfulness (see United States v. Whitmore).
i. To offer reputation evidence, a party must establish that the character witness is
qualified by having acquaintance with…
1. The witness;
2. His “community”;
3. The circles in which he has moved, as to speak with authority of the
terms in which generally the witness is regarded.
ii. Once attacked, the witness’s character can be bolstered
b. Rule 608(b)—while not using extrinsic evidence, a lawyer can cross-examine the witness
about specific instances of conduct to test the credibility of a witness (however, lawyer
stuck with the answer) (see Whitmore II). [Also see at Rule 403(a)]
i. To ask about instances, counsel need only have “reasonable basis for asking
questions which tend to incriminate or degrade the witness,” and in possession of
some facts which support a genuine belief that the witness committed the offense
or degrading act.
5. Prior Convictions (Rule 609)—if a specific instance of conduct – showing the bad character for
truthfulness of a testifying witness – is a criminal conviction of that witness, then Rule 609 often
allows extrinsic evidence of that conviction to attack truthfulness.
a. Rule 609(a)(1)—conviction must be a felony (punishable by more than one year); OR
i. Balancing Test—probative value outweighs the prejudicial effect; look at
impeachment value of the prior crime; remoteness of the crime; degree to which
the witness’s credibility is an issue in the case; importance of criminal
defendant’s testimony; similarity between past crime and present issue.
b. Rule 609 (a)(2)—crime of dishonesty or false statement (e.g. perjury, fraud).
i. Admissible regardless of balancing test, regardless of whether the crime is a
felony/misdemeanor (see Hayes).
c. Rule 609(b)—if the time between conviction or release from confinement and the
testimony is more than ten years, cannot be used, unless, in the interests of justice, the
court determines the probative value substantially outweighs the prejudicial effect
(opposite of regular 403 test).
6. Prior Inconsistent Statement (Rule 613)—allows an attorney to show that the witness’s story is
inconsistent, saying different things at different times, and is therefore not trustworthy.
a. Rule 613(b)—if attorney is going to submit the prior inconsistent statement into
evidence, the attorney must give the witness an opportunity to explain or deny the prior
inconsistent statement at some point in the trial (see Young).
7. Bias—even if a witness is not a “liar” by nature, nor has changed their story, an attorney may
show that the witness has a specific incentive or reason to lie – such as a personal or economic
bias in the case (see United States v. Abel).
a. Must still survive Balancing Test

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Extrinsic Evidence May Be Used If Extrinsic May Not Be Used If Witness

Witness Denies… Denies…
1. Prior Conviction 1. Character for Truthfulness
(Rule 609) (Rule 608(a) and (b))

2. Prior Inconsistent Statement on a 2. Prior Inconsistent Statements as to a

Material Issue Non-Material Issue

3. Bias

OPINION TESTIMONY
1. Lay Opinion Testimony (Rule 701)—lay opinion testimony is allowed only when it is rationally
based upon the witness’s first-hand knowledge of perception, and is helpful to a clear
understanding that her testimony or to the determination of a fact issue. CANNOT be based on
specialized scientific or technical knowledge, only about certain matters that he actually
witnessed or perceived first hand. (See also Rule 602: Personal Knowledge)
a. Examples: opinion about age, speed and other measurements, physical state such as
intoxication or injury, personal emotions, sensory descriptions, land or personal services
values, sanity of testator, identification of voice or handwriting samples, or for
authentication purposes, etc.
2. Expert Opinion Testimony (Rule 702)—if a witness is a qualified expert in a legitimate
scientific, technical, or other specialized knowledge area that would be helpful to the fact finder
to better understand the factual issues in a case, then the witness can offer expert opinion
testimony; these opinions need not be based on personal perception.
a. Daubert Two-Prong Test for Reliability—overruled the old Frye test (scientific
evidence was admissible if it was based on a scientific technique generally accepted as
reliable within the scientific community); Judge as a “gate-keeper”
i. First, a court must determine whether the experts’ testimony reflects “scientific
knowledge”
1. Whether their findings are “derived by the scientific method”
2. Whether their work product amounts to “good science"
ii. Second, the expert testimony is “relevant to the task at hand (i.e., that it logically
advances a material aspect of the proposing party’s case) to assist the trier-of-fact
to understand or determine a fact in issue.”
iii. Factors for Determining Whether to Admit Expert Testimony
1. Whether the theory or technique employed by the expert is generally
accepted in the scientific community.
2. Whether it’s been subjected to peer review and publication
3. Whether it can be and has been tested, and
4. Whether the known or potential rate of error is acceptable
iv. The test is NOT the correctness of the expert’s conclusion, but the soundness of
his methodology.
v. Issues—what is the particular field the person purported to be an expert in? Is
there a problem with the field itself?
b. Qualification—preliminary question of fact under Rule 104(a)
c. Basis of Expert Opinion (Rule 703)—an expert witness can reasonably rely upon any
evidence, even inadmissible evidence, in order to arrive at her expert opinion, as long as
other experts in the field typically rely on such evidence when rendering an opinion.

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i. Can introduce that inadmissible evidence if probative value is substantially

outweighed by danger of unfair prejudice (i.e. the “Balancing Test”).
ii. Facts or data upon which opinions are based may, under the rule, be derived from
three possible sources.
1. Firsthand observation of the witness;
2. Presentation at trial;
3. Presentation of data to the expert outside of court and other than by his
own perception.
d. Battle of the Experts—tie goes to the non-moving party.
e. Opinion on the Ultimate Issue (Rule 704)—pure legal conclusions, by either lay or
expert, are not admissible “opinion” testimony and should be avoided. A witness’s
opinion can embrace the ultimate issue in the case, but it cannot be expressed as a pure
legal conclusion.
i. Example 1. Witness cannot state that D is guilty of cocaine trafficking, but
witness can describe how a typical cocaine packing operation works, leaving it
up to the fact finder to determine whether D’s activities fit the description, see
Lockett.
ii. Example 2. Psychological diagnosis is allowed as long as there is still room for
the fact finder to accept or deny the diagnosis and still determine whether D had
the mens rea to commit the crime, see Finley.
iii. Ask yourself: Does the testimony invade the province of the jury?
f. Disclosure of Facts or Data Underlying the Opinion (Rule 705)—expert witness may
provide an expert opinion on a matter, either before, or after, disclosing all of the facts or
data relied upon in arriving at that opinion. Witness needs to make it clear that she relied
on certain facts or data, even if inadmissible.
g. Court-Appointed Experts (Rule 706)—expert witness may be appointed by the court.
h. “Hard” Sciences—like math, physics, etc. Still requires judge to act as a gatekeeper.
i. “Soft” Sciences—more subjective, room for interpretation, than hard science. Judge
must carefully exercise gatekeeping role and apply Daubert and Rule 702.
_____________________________________________________________________________________

HEARSAY
OVERVIEW
1. Hearsay Risks
a. Perception (Misperception)—how well did the witness see/hear/perceive the event?
b. Recollection (Faulty Memory)—how well does the witness recall the event?
c. Narration (Ambiguity)—how well can the witness relate/explain the event? Does the
event make sense? Is the story logical/possible?
d. Sincerity (Bias)—does the witness have a reason to lie? Is the witness lying?
2. Hearsay (Rule 801)—a statement, other than one made by the declarant while testifying at the
trial or hearing (i.e. out-of-this-court), offered into evidence to prove the truth of the matter
asserted (i.e. what one person hears another person say) Exclusionary Rule
a. Statement—means (1) a person’s oral or written assertion, or (2) nonverbal conduct, if
the person intended it as an assertion.
i. Assertion—something someone says or does in order to communicate a fact or
opinion in the hope or expectation that it will be accepted as true or accurate
(photographs, films, videotape, typically not an assertion) (utterance is NOT an
assertion).
1. Direct—“the blue car hit the red car”
2. Indirect—“no one uses their signal light”
3. Hidden—“that car is hot” (temperature or stolen?)

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4. Hyperbolic—“I am so hungry I could eat a horse”

5. Linked—the answer provides the assertion – “yes” to a leading question.
a. Objection—answer leads to hearsay
6. Vicarious—an assertion by a declarant treated as though it had been
made by another person, “John saw the green car run the red light”
7. Implied—an assertion not directly reflected in the words spoken
ii. Non-Verbal Conduct—pointing (e.g. in a lineup), traffic direction
 Is a question considered hearsay?
b. Out of Court—what happens when the Declarant and the witness are one and the same?
i. Whenever a witness seeks to testify to words that were spoken by anyone
(including him or herself) at any time other than while testifying during the
current trial, those words fit the second element of Rule 801(c) assuming they
meet the rest of the definition.
c. Declarant—means the person who made the statement.
i. Non-Human Declarations
1. Machines—if the information is automated, it is unlikely hearsay is
implicated because the risks associated with hearsay are most likely not
present.
2. Animals—“the questions of testimony from animals is not usually an
issue”…in most cases, the evidence relates to a canine tracking or
otherwise using its extraordinary abilities to identify scents as evidence
d. Hearsay—means a statement that…
i. The declarant does not make while testifying at the current trial or hearing; and
ii. A party offers in evidence to prove the truth of the matter asserted in the
statement
1. Purposes Other Than Truth of the Matter Asserted
a. Impeachment of Witness
i. One is simply pointing out that the two statements are
inconsistent and therefore the witness’s story may not be
trustworthy.
b. Effect on the Listener (or reader or viewer of conduct)
i. To show why they may have felt threatened, put on
notice, been misled (see McClure v. State).
1. I.e. “reaction”
c. Verbal Acts
i. Where the words have an independent legal
consequence, constitute a contract between parties,
defamatory statements, and statements that may
constitute a crime (see Hanson v. Johnson)
d. Circumstantial Evidence of State of Mind or Belief
i. Belief or fear of something; knowledge or lack of
knowledge; lack of predisposition to commit crime;
motive; notice
3. Statements That Are Not Hearsay (Rule 801(d))
a. A Declarant-Witness’s Prior Statement—the declarant testifies and is subject to cross-
examination about a prior statement, and the statement…
i. Prior Inconsistent Statement (Rule 801(d)(1)(A)—Is inconsistent with the
declarant’s testimony and was given under oath and penalty of perjury at trial,
hearing, or other proceeding or in a deposition;

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ii. Prior Consistent Statement (Rule 801(d)(1)(B)—Is consistent with the declarant’s
testimony and is offered to rebut an express or implied charge that the declarant
recently fabricated it or acted from a recent improper influence or motive in
testifying (see Tome v. United States); or
1. Must establish when the motive for fabrication occurred. Cannot
introduce out-of-court statements made after alleged motive to fabricate
arose.
iii. Prior Statement of Identification (Rule 801(d)(1)(c)—Identifies a person as
someone the declarant perceived earlier (see United States v. Lewis).
1. Admissible regardless of whether there has been accurate in-court
identification.
2. Rationale: Witness is available for cross-examination
b. An Opposing Party’s Statement (“Admission of a Party Opponent”)—the statement
is offered against an opposing party and…
i. Was made by the party in an individual or representative capacity (Jewel v. CSX
Transportation, Inc.);
ii. Is one the party manifested that is adopted or believed to be true;
1. United States v. Morgan, government manifested its belief in the truth of
the “reliable” informant’s statements in a sworn affidavit.
iii. Was made by a person whom the party authorized to make a statement on the
subject;
1. Kirk v. Raymark Industries, expert witnesses employed by the opposing
party are not agents of the opposing party, and cannot be authorized to
make a statement on behalf of the party.
iv. Was made by the party’s agent or employee on a manner within the scope of that
relationship and while existed; or
1. Mahlandt v. Wild Canid Survival & Research Center, Inc.
v. Was made by the party’s co-conspirator during and in furtherance of the
conspiracy.
1. Bourjaily v. United States—Rule 104 allows the court to use any
evidence relevant to 801, preponderance of evidence of conspiracy.
4. Hearsay Within Hearsay (Rule 805)—every level of hearsay has to be addressed
a. Can “strike” or “redact” portions of hearsay to only address one level.
HEARSAY EXCEPTIONS
1. Rule 803 – Availability of Declarant Immaterial (strong exceptions)
a. Present Sense Impression—if a declarant is simultaneously describing or explaining an
event or condition when perceiving it, or immediately thereafter, the statement is
admissible. Timing is critical; such a statement is reliable because the Declarant has little
or no time to fabricate (Schindler v. Seiler).
i. “Immediately thereafter”  “slight lapse of time”
b. Excited Utterance—if a declarant makes a statement under the stress of a startling event
or condition, caused by, and relating to, the event or condition, the statement is
admissible (City of Dallas v. Donovan)
i. Not confined to statements describing or explaining the startling event itself
ii. Factors
1. How exciting was the event
2. Period of time between the event and the statement
3. Whether the statement was in response to a question
4. Whether declarant was bystander or participant to the event

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c. Then Existing Mental, Emotional, or Physical Condition—if a declarant makes a

statement explaining her own then existing condition (but not a memory or belief about a
past event), then the statement is admissible.
i. This includes current intentions about a future event because although the vent
may occur in the future, the intent to do something in the future is really a
present, then existing, thought.
ii. Can serve as circumstantial evidence that the declarant eventually acted on their
intention (Mutual Life v. Hillman). Same reliability is found when declarant
makes a statement about a then existing physical condition (Salinas).
d. Statements for Purposes of Medical Diagnosis or Treatment—if a declarant makes a
statement to receive a medical diagnosis or treatment—admissible. This includes
statements about past conditions relevant to the treatment or diagnosis (State v. Moen).
i. Requirements
1. Statement must be “made for purposes of medical diagnosis or
treatment”;
2. Statement must describe or relate “medical history, or past or present
symptoms, pain or sensation, or the inception or general character of
theca sue or external source;
3. Statement must be “reasonably pertinent to diagnosis or treatment”
ii. Can a witness (e.g., doctor) testify about what a third person (e.g., parent) said
concerning someone else’s (e.g., child) need for diagnosis/symptoms?
1. It depends…
e. Past Recorded Recollection—if declarant’s recollection cannot be refreshed under Rule
612, it is possible to use a document that contains the declarant’s past recollection if…
i. The document information about which the declarant once had knowledge;
ii. Declarant cannot now remember (insufficient recollection to enable witness to
testify fully and accurately);
iii. The document was made or adopted by the witness, when the matter was fresh in
the mind of declarant (contemporaneous element); and,
iv. The document accurately reflects that knowledge.
v. NOTE—can only be read in open court, and is not itself an admitted exhibit (U.S.
v. Mornan).
f. Business Records—if a declarant keeps “business” records of any kind relating to the
operation of the business, they may be admissible if…
i. Those records are offered through a witness who is a custodian or other qualified
witness;
ii. The person who made the record had knowledge of the matter;
iii. The record was made at or near the time of the events or conditions therein
occurred (contemporaneous element);
iv. The person had a business duty to do so that was a regular practice of the
organization; and,
v. The record was kept in the course of that business activity.
vi. NOTE—the record must not lack trustworthiness; for example, it was made with
an “eye toward litigation,” rather than being a record created that was actually
necessary to run the business (Keogh).
1. “Business”—business, institution, association, profession, occupation,
and calling of every kind, whether or not conducted for profit.
2. Evidence must be a “memorandum, report, or date compilation in any
form.”
g. Absence of Business Records—ADD LATER

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h. Public Records and Reports—like business records exception, but…

i. Police reports are excluded (for matters observed and recorded in criminal cases)
ii. In civil cases (and against the government in criminal cases), factual findings
made pursuant to a duty by law are admissible even if those finding include the
“opinions and conclusions” of public agency officials (Beech Aircraft v. Rainey).
2. Rule 804 – Declarant Unavailable
a. 804(a)
i. Privilege—E.g. Fifth Amendment right against self-incrimination, patient-doctor
ii. Refusing to Testify (although ordered by the court)
iii. Lack of Memory
iv. Death (or then existing Physical/Mental Illness Infirmity)
v. Absence and proponent unable to procure attendance
b. 804(b)
i. Former Testimony—the testimony must have been the same testimony given in a
prior proceeding or deposition. If the party against whom the testimony is now
offered in a civil action or proceeding had an opportunity and similar motive to
develop testimony by direct/cross/redirect examination.
1. See U.S. v. DiNapoli—prosecutor’s motives are different at a preliminary
hearing than it is at trial.
ii. Statement Under Belief of Impending Death—if an unavailable declarant made a
statement based on personal knowledge while under the belief that her own death
was imminent, and the statement concerned the cause of circumstances of her
impending death, then that statement will be admissible.
1. This exception applies in civil cases, and homicide criminal cases only.
iii. Statement Against Interest—if a declarant makes a statement that when made is
against her economic or legal interest such that a reasonable person would not
make the statement unless it were true, then that statement is admissible.
1. If the statement is made to exculpate another person from criminal
liability, the statement must have some corroboration.
iv. State of Personal or Family History—the exception is simple deference to a
family member who had made a statement about a family history matter.
v. Forfeiture by Wrongdoing—if a party is involved in, or responsible for, a
declarant’s unavailability, then any statement the declarant made can be used
against the party so the party does not profit from her misdeed (U.S. v. Gray).
1. Standard (to be proved by preponderance of the evidence)
a. The defendant engaged or acquiesced in wrongdoing
b. That was intended to render the declarant unavailable as a
witness, and
c. That did, in fact, render the declarant unavailable as witness
3. Rule 807 – Residual Exception—under the following circumstances, a hearsay statement is not
excluded by the rule against hearsay even if the statement is not specifically covered by a hearsay
exception in 803 or 804…
a. The statement has equivalent circumstantial guarantees of trustworthiness;
b. It is offered as evidence of a material fact;
c. It is more probative on the point for which it is offered than any other evidence that the
proponent can obtain through reasonable efforts; and
d. Admitting it will best serve the purposes of these rules and the interests of justice
e. Notice—only admissible if, before the trail or hearing, the proponent gives an adverse
party reasonable notice of the intent to offer the statement and its particulars (including
name/address, so that the party has a fair opportunity to meet it).

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4. Remaining Exceptions
a. Records of Vital Statistics (e.g. birth, marriage, death certificates)
b. Absence of Public Record or Entry (record should be there, but is not, evidence to
show that the record did not exist)
c. Records of Religious Organizations
d. Marriage, Baptismal, and Similar Certificates
e. Family Records
f. Records of Documents Affecting an Interest in Property
g. Statements in Documents Affecting an Interest in Property
h. Statements in Ancient Documents (at least 20 years old and authenticity established)
i. Market Reports and Similar Commercial Publications
j. Learned Treatises
k. Reputation Concerning Personal or Family History
l. Reputation Concerning Boundaries or General History
m. Reputation as to Character
n. Judgment of Previous Conviction
o. Judgment as to Personal, Family or General History or Boundaries

HEARSAY AND CONSTITUTIONAL ISSUES

1. Sixth Amendment Right to Confrontation—“In all criminal prosecutions, the accused shall
enjoy the right … to be confronted with the witnesses against him.”
a. The Crawford Rule—the Sixth Amendment bars “admission of testimonial statements of
a witness who did not appear at trial unless he was unavailable to testify, and the
defendant had had a prior opportunity for cross-examination.” (Crawford v. Washington)
i. Testimonial—statements made when the circumstances objectively indicate that
there is no such ongoing emergency, and that the primary purpose of the
interrogation is to establish or prove past events potentially relevant to later
criminal prosecution. (See Davis v. Washington)
1. Examples: statements to police concerning past events.
ii. Nontestimonial—statements made in the course of police interrogation under
circumstances objectively indicating that the primary purpose of the
interrogation is to enable police assistance to meet an ongoing emergency.
1. Examples: 911 call if the caller is facing an ongoing emergency, and not
acting as a witness.
iii. Breakdown: what is happening (nontestimonial) vs. what happened (testimonial)
b. Waiver of Confrontation Clause Rights and Forfeiture by Wrongdoing—the waiver
of Confrontation Clause rights applies in the most egregious examples, such as a
defendant arranging for the murder of a witness, and also applies when the defendant
“suggests” the witness not testify against the defendant at trial, and applying “subtle
coercion” (providing favors, gifts, “warnings”) resulting in the witness’s “voluntary”
decision not to testify (see Scott).
_____________________________________________________________________________________

AUTHENTICATION—the process of proving that a particular piece of evidence is what the proponent of
the evidence claims it to be.
1. Requirement of Authentication or Identification (Rule 901)—applies only to tangible exhibits.
Party seeking to admit the exhibit must demonstrate to the court that there is reasonable
probability that the evidence is what its proponent claims.
a. Basic Requirements
i. Authentication is a condition precedent to admissibility;
ii. This condition is satisfied by evidence which supports the finding; and,

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iii. The finding must be that the matter in question is what the proponent claims it to
be.
2. “Chain of Custody”—for exhibits that are easily interchangeable, and thus difficult to identify,
chain of custody will be used to show that the item seized from the defendant can be fully
accounted for at all times, fro the time of seizure, up to the moment it is introduced at trial.
a. Chain of custody often goes only to weight, rather than admissibility, especially when an
exhibit is easily identifiable.
3. Writings and Other Documents—if a witness is familiar with the handwriting of the person
who wrote, or signed, the document, then the witness can authenticate it (and need not be an
expert). If the witness recognizes “distinctive characteristics” about the writing, such as its
contents, substance, or other distinctive markings, it can be used to authenticate the writing.
a. MUST be authenticated by someone with personal knowledge about, and sufficient
familiarity with, the document, and/or someone who recognizes certain “distinctive
characteristics” within the document that allows the witness to sufficiently identify the
document.
4. Voice Identification and Telephone Conversations—can be authenticated by someone hearing
the voice or making or receiving the telephone call who is familiar with the voice or who has
made or received a telephone call at or from a certain telephone number, see Espinoza.
5. Photographs—authenticated similar to writings. Foundation depends on how the photo will be
used at trial…
a. Demonstrative evidence—(to help clarify the testimony of a witness) the witness merely
needs to state that the photo is a “fair and accurate” depiction of the scene about which he
is testifying at the time and date in question (photo is not evidence, only the testimony of
the witness)
b. Evidence Itself—if no witness can establish that photo is a fair and accurate
representation, more substantial foundation needed.
6. Internet and E-Mail Evidence—as long as a witness with knowledge can testify about the
email, and/or can identify distinctive characteristics about the message, the email can be
authenticated. Lack of trustworthiness goes to the weight the jury should give the evidence, not
to its authenticity.
7. Self-Authenticating Exhibits—do not require extrinsic evidence of authenticity as a condition
precedent to admissibility. These are self-authenticating documents because there is such a low
probability of forgery existing in these instances that it is a rule of practical efficiency to think of
the foundation as already existing with the document itself.
8. Demonstrative Evidence—Evidence that appeals to the senses—e.g., photographs, charts,
graphs, objects (i.e., a gun), maps, models, simulations, animations, displays, day-in-the-life
videos, experiments, re-enactments, etc.
a. Computers
i. Animations—a computer generated exhibit that is used as a visual aid to illustrate
an opinion that has been developed without using the computer.
1. Foundation—visual aid does not require a showing that the exhibit was
produced by a scientific or technologically valid method
ii. Simulations—a computer generated exhibit created when information is fed into
a computer that is programmed to analyze the data and draw a conclusion.
1. Foundation—before admitting a simulation, in which the computer has
been used to analyze data, the courts require proof of the validity of
scientific principles and data.
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BEST EVIDENCE RULE

1. Whenever the contents of any type of “writing” or “recording” is to be proved in a case, the BER
requires that the original writing or recording must be produced at trial in order to prevent fraud
or inaccuracy.
2. A copy or duplicate of an original is generally admissible in place of the original.
a. Duplicates (accurate representations of the original, but not intended as an original) are
admissible as if they were an original, provided there is no claim that the original is not
authentic, or that it would be unfair under the circumstances to admit the duplicate in lieu
of the original.
3. If the absence of an original or duplicate can be adequately explained (inadvertently lost or
destroyed, or is not obtainable, etc.) then “secondary” evidence, such as testimony about the
writing or recording, will be allowed in place of the original or duplicate.
4. What Constitutes a Writing or Recording? Rule 1001 includes diagrams, photographs,
drawings, artwork (see Lucasfilm), computer printouts, and electronic/mechanical/magnetic data
compilations.
5. When are the Contents to be Proved? When a writing is offered to prove an event, or if the
witness’s testimony is reliant on the writing, then the contents are being proved, see Bennett.
a. Contents are not in issue if a writing or recording about that event exists (e.g. a buyer of
goods may testify that she paid for them without having to produce a receipt).
b. Rule is also inapplicable if the contents of a physical tangible object are in issue (e.g., a
weapon, shoes, or drugs, etc.), or if the writing is merely collateral to a main issue in the
case.
c. Rule inapplicable when witness merely identifies a photo as a correct representation of
events that he saw or of a scene with which he is familiar.
6. Summary of Originals or Duplicates—summary is a document created for trial. However, if
the writings/recordings, which the summary is based, are original or duplicate
writings/recordings, then the summary is admissible.
a. For summary to be admitted, the proponent must establish that the underlying evhibits are
too voluminous to be conviently…ADD MORE FROM SLIDES
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PRIVILEGES—generally protect against disclose of confidential communications between people with

certain legally recognized relationships.
1. Attorney-Client (may be claimed on behalf of the client by the attorney or others representing
the client’s interests)
a. Client—person, or any legal entity, who consults a lawyer with a view toward being
represented, including corporations, and any individual in his or her corporate capacity.
i. In the corporate context, attorney-client privilege extends to lower level
employees, not just to those in control of the corporation, see Upjohn v. United
States.
b. Attorney—is anyone authorized to practice law in a jurisdiction, but the privilege also
extends to communications with that attorney’s representative and employees who assist
the attorney in providing legal services to the client, as long as the attorney is seeking the
non-lawyer’s services for representation purposes of the client (see Kovel).
c. Communication—communication made in confidence for the purpose of obtaining legal
advice from the lawyer.
i. Excluded From Privilege—Observationsphysical characteristics of the client,
such as his complexion, his demeanor, his bearing, his sobriety, and his dress.
d. Made in Confidence—limited to communications that the client either expressly made
confidential or that he could reasonably assume under the circumstances would be
understood by the attorney as confidential.

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i. Presence of Third Party—usually destroys the privilege, except when the third
person was present as the attorney’s client’s representative to further the
rendition of legal service or facilitate the transmission of communications.
e. To Facilitate Legal Services—protects not only the giving of professional advice to
those who can act on it but also the giving of information to the lawyer to enable him to
give sound and informed advice (see United States v. Rowe).
2. Spousal
a. Adverse Testimonial Privilege (only in criminal cases)—allows a witness spouse to
refuse to take the stand and testify against the other spouse as to any matters.
b. Martial Communication Privilege (both criminal and civil)—requires that the words
or acts are (1) intended as communication to the other spouse, (2) made during a valid
marriage, unless the couple had irreconcilably separated, and (3) made to the other
spouse in confidence.
3. Self-Incrimination
a. The Fifth Amendment provides, “No person shall . . . be compelled in any criminal case
to be a witness against himself . . . .” But also applies in civil cases; applies only to
individuals, not corporations, and only narrowly to testimonial evidence.
i. Applies not only to oral testimony, but can also apply to written records and
reports, especially if they are not private.
4. Waiver of Privilege
a. Crime-Fraud Exception—if a client communication to an attorney is to enable the client
to commit a crime or fraud, the A/C privilege is considered waived by the client.
b. Failure to Assert the Privilege
c. Waiver by Voluntary Disclosure
d. Waiver by Putting the Protected Information at Issue
e. Waiver in a Federal Proceeding or to a Federal Office or Agency
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JUDICIAL NOTICE
1. Rule 201—limited to adjudicative facts (those of which the jury will consider) that are easy to
prove (not of a questionable issue).
a. Adjudicative Facts—are facts that are decided by a jury in a jury case or by the judge in
a bench trial and which would normally be proved by evidence if judicial notice were not
taken (take notice of a street and the way in runs, or that a particular date relates to a
particular day).
i. Judicial notice will only be taken when . . . , and the adjudicative facts must be
either…
1. A matter of general knowledge in the jurisdiction; or,
2. Capable of ready determination by sources whose accuracy cannot
reasonably be questioned.
ii. Civil Case—once judicial notice is taken, it is conclusive, meaning it is to be
considered established as though proved or as if the parties had stipulated to its
truth.
1. E.g., a court can take notice of the fact that banks send customers
monthly statements and those statements inform their customers to
whom their money was paid and in what amounts (see Kaggen v. IRS).
iii. Criminal Case—while conclusive in a civil case, the jury is not bound to accept
the judicially noticed fact and may disregard it if it so chooses (see United States
v. Jones).

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2. Legislative Facts—background facts used by the court to arrive at a legal decision, such as social
science propositions.
a. Not regulated by Rule 201.
3. Evaluative Facts—common information, concepts, and understandings in society, such as people
are late for appointments are more likely to speed.
a. Not regulated by Rule 201.
4. Facts within Personal Knowledge of the Judge—a trial judge is prohibited from relying on his
personal experience to support the taking of judicial notice (see United States v. Lewis).

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FEDERAL ADMINISTRATIVE LAW

Professor Jeffrey Butler, Michaelmas Term 2011

ADMINISTRATIVE AGENCIES AND ADMINISTRATIVE LAW

1. What is Administrative Law?
a. Definition—administrative law is all about power, and –
i. How it is vested in administrative agencies;
ii. How it is constrained (i.e., requirements imposed on the exercise of power); and,
iii. How it is challenged (i.e., remedies against unlawful administration of power).
b. Purpose
i. To keep administrative powers within their legal bounds and to protect
individuals against abuse of those powers;
ii. Sets forth powers that may be exercised by administrative agencies; and,
iii. To lay down the principles governing the exercise of those powers, and provide
legal remedies to those aggrieved by administrative action.
c. Administrative Law deals with—
i. The ways in which power is transferred from legislative bodies to administrative
agencies;
ii. How administrative agencies use power; and,
iii. How courts review the actions taken by administrative agencies.
d. Sources of Administrative Law
i. Federal Administrative Procedure Act (APA)—law laying down the basic
procedures that must be followed by federal agencies; the foundation of federal
administrative law. The Act was promulgated in 1946.
ii. Model State APA (1961)—corresponding state legislation has been enacted in
almost all states, most of which has been patterned after the Model State APA.
iii. Judicial Review—judicial review is an important means of restricting irrational
agency behavior.
e. Gilmore v. Lujan—federal administrative laws are the same as statutes passed by
Congress. Ignorance of federal administrative laws is not an excuse. Parties dealing with
the government are chargeable with knowledge of duly promulgated regulations.
2. Administrative Agencies
a. Federal APA §551(1) Definition of Agency—“agency” means each authority of the
government of the U.S., whether or not it is within or subject to review by another
agency, but does NOT include –
i. The Congress;
ii. The courts of the United States;
iii. The governments of the territories or possessions of the United States;
iv. The government of the District of Columbia; and,
v. The President
b. How Does an Administrative Law Case Arise? Every administrative law case arises
out of a controversy between a private party and an administrative agency.
c. Powers of Agencies—many agencies have been given (authority delegated down from
the legislature to the agency) both quasi-judicial and quasi-legislative authority in order
to determine private rights and obligations.
i. Quasi-Judicial Authority (Adjudicatory Authority)—includes powers to decide
controversies between parties; authority to decide cases.
ii. Quasi-Legislative Authority (Rulemaking Authority)—involves the power to
promulgate rules and regulations which, like statutes, have the force and effect of
law; authority to issue rules and regulations that have the force of law.

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d. Effect of Agency Rules—agency rules have the force and effect of law so long as they
are constitutional, were promulgated in a procedurally proper manner, and do not stray
beyond the authority conferred by the legislature (i.e., they are not ultra vires).
e. Appointment—all officers of the U.S. must be appointed by the President with the
advice and consent of the Senate. Congress may vest (confer power) the appointment of
inferior offices in the President alone, the courts, or the heads of departments. U.S.
Const. Art. II, §2.
f. Wyeth v. Levine—dealing with the effect of agency “proclamations” on state law.
Agency will be given some deference where technical expertise is involved. Scope of
agency authority defined by the enabling statutes. History of agency regulatory action or
“longstanding” interpretation is a factor, but not dispositive.
3. Types of Agencies
a. Agencies Fall Within Two Structural Categories
i. Independent Agencies (Multi-Member Commissions, e.g., ICC, SEC, FTC):
1. “Independent” refers to an agency that is insulated from presidential
control in one or more ways. The question is whether the removal
restrictions are of such a nature that they impede the President’s ability
to perform his constitutional duty.
2. There is a statutory limit on the President’s power to remove the head (or
members) of the agency.
3. No more than a simple majority of these members may come from one
political party.
4. The members of the group have fixed, staggered terms, so that their
terms do not expire at the same time.
5. The members can only be removed by the president for “cause” (e.g.,
inefficiency, neglect of duty, or malfeasance in office); this is a primary
characteristic – insulation from arbitrary and executive control. This is
unlike most executive officials, who serve at the pleasure of the
President.
ii. President’s Executive (Dept./Cabinet) Agencies (Single-Head Agencies):
1. Most administrative agencies of the executive branch (e.g., Dept. of
Labor and Agriculture) are headed by a single individual appointed by
the President.
2. The President has the power to remove heads of agency/department from
office without cause; they are subject to the discretion and control of the
President.
b. Regulatory v. Non-Regulatory Agencies
i. Regulatory Agencies—Regulatory agencies are usually vested with
comprehensive jurisdiction to regulate a wide spectrum of economic activities of
specific industries.
1. Two important regulatory functions are the protection of public
health/safety (EPA and OSHA) and the regulation of commerce and
trade, which is a traditional “economic” regulation involving regulating
entry, prices, production costs, or other aspects of business and industry.
2. Examples of Regulatory Agencies:
a. Interstate Commerce Commission (ICC) – first independent
regulatory commission created by Congress.
b. The Big Seven – Federal Trade Commission (FTC), Federal
Power Commission (FPC), Federal Communications
Commission (FCC), Securities and Exchange Commission
(SEC), National Labor Relations Board (NLRB), and Civil

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Aeronautics Board (CAB). Collectively, they regulate the major

industries of the U.S. economy: communications, transportation,
and energy.
3. Regulatory Powers – Economic Regulation has Three Categories:
a. Licensing—Agency regulates entry into the affected industry by
issuing certificates of “public convenience/necessity” to
successful applicants.
b. Ratemaking—Setting the rate to charge consumers for products.
c. Business Practices—Jurisdiction over practices such as
purchases, mergers, consolidations, stock issuances, and various
antitrust activities.
ii. Non-Regulatory Agencies—These agencies typically dispense money (e.g.
government insurance and pensions) to promote social and economic welfare.
Large numbers of citizens are government clients.
4. Agencies and Independence
a. Basic Principles
i. Branches of Government
1. Legislative
2. Judicial
3. Executive
4. Headless Fourth Branch (Administrative Agencies)—created by
Congress, they administer the law in an executive capacity, they create
the law by issuing regulations, and they interpret the law by means of
administrative law judges.
b. Bowsher v. Synar—Congress cannot delegate its power to appropriate public funds to an
administrative agency. Once Congress makes its choice in enacting legislations, its
participation ends. Congress can thereafter control the execution of its enactment only
indirectly (by passing new legislation).
i. Congress cannot grant to an officer under its control (under control because
Congress had right to remove) what it does not possess, i.e., the ability to execute
the laws as the Comptroller General was doing. To allow this would mean that
legislative and executive powers are not being separated.
c. Johnson v. US RR Ret Bd.—agency is entitled to no deference where it is interpreting a
statute other than its own enabling statute.
d. Morrison v. Olson—Congress may provide for the judicial appointment of independent
counsel for purposes of investigating and prosecuting federal criminal offenses.
Independent agencies are okay and don’t violate the separation of powers of
Appointments Clause – called independent because they are insulated from arbitrary
removal by executive branch. The question is whether the removal restrictions are of
such a nature that they impede the President’s ability to perform his constitutional duty.
i. The Act does not violate the Appointments Clause for Congress to vest the
appointment of independent counsels; the powers exercised under the Act do not
violate Article III; and the Act does not violate the separation of powers principle
by impermissibly interfering with the functions of the Executive Branch.
ii. Appointments Clause Analysis—Ind. counsel is an “inferior officer” based on the
fact that she is subject to removal by a higher executive branch official; can be
removed by Attorney General. Also, ind. counsel can only perform certain,
limited duties under the Act. “Congress may by Law vest the Appointment of
such inferior officers, as they think proper, in the President alone, in the courts of
Law, or in the Heads of Departments. It’s not improper for Congress to vest the
power to appoint independent counsel in a specially created federal court.

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iii. Separation of Powers Analysis—The power to appoint inferior officers is not in

itself an executive function. The independent counsel is a member of the
executive branch – Attorney General supervises/controls the prosecutorial
powers of the independent counsel, and retains the power to remove the counsel
for “good cause.” Furthermore, it is the Attorney General that must request
appointment, thus giving the Executive a degree of control over the power to
initiate an investigation. Congress isn’t encroaching on executive powers;
therefore, Separation of Powers is not violated.
5. Historical Perspectives and the Future of Administrative Law
a. General Rule – Stages of Administrative Agencies—Administrative agencies can be
described as passing through several stages of existence. They are usually born amid
high hopes that government has taken effective action in creating a new mechanism to
carry out the nation’s goals in an area requiring dedicated attention.
b. What to Be Aware of With Administrative Agencies
i. The reason why the agency was created is no longer an issue, so the agency loses
its drive (low hanging fruit).
ii. The social conditions give the agencies their initial momentum and tend to
change their shape.
c. Public Choice Theory v. Capture Theory
i. Public Choice Theory
1. Modern public choice theory regards all organized groups demanding
services from political institutions, including business and producer
groups, environmental groups, labor unions, civil rights groups, and rent
control activists. It also regards not just administrative agencies but also
legislatures, the President, and to an increasing degree even the courts, as
institutions that should be modeled on the assumption that they seek to
maximize their own self-interested ends in the way they respond to these
multifarious groups.
2. People are acting in their own self-interest; what is right for them.
3. This is where we stand today. We have moved past the Capture Theory
Era.
ii. Capture Theory
1. It deals with the disproportionate influence of one type of group –
business or producer groups- and focused almost exclusively on the
influence that this type of group wielded over one governmental
institution – the administrative agency. They capture the agency –
tremendous political power that takes over an agency.
d. Globalization and Privatization
i. A new administrative law is emerging, characterized in part by the following
factors:
1. New blends of public and private power at all levels of government;
2. A redefinition of what is public and what is private;
3. Greater reliance on bargaining and negotiation models of decision-
making when it comes to the way the state exercises its power;
4. A diminution of public participation stemming from increased reliance
on privatization and, in effect, the delegation of public functions to
private entities;
5. A market discourse that arguably narrows the role of non-economic
values in decision-making processes.
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DELEGATION OF POWERS
1. Introduction
a. An administrative agency is a creature of statute. All authority pursuant to which an
agency may act ultimately must be grounded in an express grant from Congress.
i. The constitutional limits on Congress’s authority to delegate certain types of
power to administrative agencies make up the delegation/non-delegation
doctrine.
b. The statute is the source of agency authority as well as its limits. If an agency act is
within the statutory limits (vires) its action is valid; if it is outside them (ultra vires), it is
invalid/unlawful.
c. Delegation and Limitations—focus on rulemaking authority (rules made by agency
have the effect of a statute), enforcement authority, and adjudicatory authority of an
agency (formal proceedings have adjudicatory effect).
2. Legislative Power [Rulemaking]
a. Introduction
i. The lawmaking power is entrusted in the Congress; however, Congress (the
legislature) has delegated significant powers of lawmaking to agencies.
1. The foundation of representative government is in the legislature as the
lawmaking organ of the polity.
ii. Statutes delegate “quasi-legislative” power, meaning the power to make rules
that have a legal effect on people’s everyday conduct.
iii. Constitutional Test: Congress can delegate quasi-legislative power as long as it
gives the agency (or official) an “intelligible principle” to follow in exercising
that power.
iv. Congress’ delegation of legislative power to administrative agencies does not
violate Separation of Powers.
b. Separation and Delegation
i. In classic constitutional theory, the separation-of-powers notion requires that
each branch of government stay separate and exercise only the authority given to
them by the Constitution.
ii. Syllogism
1. Major Premise—Congress cannot constitutionally delegate legislative
power.
2. Minor Premise—It is essential that certain powers be delegated to
administrative officers and regulatory commissions
3. Conclusion—Therefore, the powers thus delegated are not legislative
powers. They are instead “administrative” or “quasi-legislative” powers.
iii. More Realistic Approach: The law has shifted from an unworkable rule
prohibiting any delegation of legislative power to one prohibiting excessive
delegation.
c. Unconstitutional Delegations: Courts have found delegation of legislative power to an
agency as unconstitutional (out of bounds for delegation) only twice –
i. Panama Refining Co. v. Ryan—Section 9(c) of the National Industrial Recovery
Act empowered the President to prohibit the transportation in interstate
commerce of “hot oil.” The delegation was invalid. The statute contained only
the bare delegation: Congress had not stated whether or in what circumstances or
under what conditions the President was to exercise the prohibitory authority.
Congress had not set up a standard for the President’s action. Instead, it gave the
President an unlimited authority to lay down the prohibition or not, as he might
see fit.

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ii. Schechter Poultry Corp. v. United States—Section 3 of the National Industrial

Recovery Act authorized the President to approve “codes of fair competition” for
the governance of trade and industries. When a code was approved, its
provisions were to be the “standards of fair competition” for the trade or industry
concerned, and any violation was punishable penalty. The delegation was invalid.
The delegation was too broad. The statutory term “fair competition” was not a
limiting standard but instead gave the President the ability to regulate every
aspect of the poultry business. It involved the broadest delegation Congress has
ever made.
1. The notion of communism arises in a decision like this.
d. Post-1935 Federal Cases—Since the two cases above, the Supreme Court has upheld
Congress’ ability to delegate power to governmental bodies under broad standards.
i. Schechter remains as a warning that there is still a line beyond which Congress
may not go in delegating power.
ii. The Panama decision is a different matter. Cases have moved closer to the
dissent than the majority in this case: “[t]he Court has upheld statutes containing
only vague standards and statements of policy and delegating very broad
discretion.” While the Supreme Court has continued to assert the need for
standards, it has upheld standards at least as broad as those involved in Panama.
iii. Often cited cases to illustrate the post-1935 Supreme Court approach to
delegation –
1. Yakus v. United States: There was a desire to control prices during the
war so the agency was given the authority to decide what would be fair
and equitable. The court found this to be valid because the administrator
had enough expertise to make this decision.
2. Lichter v. United States: Control of excessive profits by experts in
relative fields was not too broad. Sufficient explanation of congressional
policy.
3. Fahey v. Mallonee: Terms and conditions under which a federal home
loan conservator in a bank board could be appointed was not too broad as
were expert who could be appointed.
e. Mistretta v. United States – Delegation to Independent Commission—Intelligible
principles do not have to be precise and definite so long as it is sufficient to guide the
agency in carrying out the legislative mandate.
1. NOTE—Intelligible principles = death of the non-delegation doctrine.
ii. Congress may confer rulemaking authority on judicial branch as long as
Congress lays down an intelligible principle to which the person or body
authorized to (exercise delegated authority) is directed to conform, such
legislative action is not a forbidden delegation of legislative power.
1. The intelligible principle just has to be there – it doesn’t have to be
much; if an intelligible principle exists to guide the commission, then it
is valid. Congress cannot do its job without delegating some power out.
iii. EXAM TIP: If you have an issue where too much power is being delegating out,
but it’s not invading the executive branch, and then another branch has a final
say, this is the case to look to.
f. Federal Delegation – A Caveat
i. No federal court has struck down the non-delegation doctrine; most continue to
assert the need for standards in statutes delegating legislative power.
ii. Rationale for Non-Delegation Doctrine
1. Eliminates agency arbitrariness
2. Facilitates judicial review

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3. Ensures that Congress only makes major policy reasons

iii. American Trucking Assn. v. EPA – Unconstitutional Delegation—A statute that
delegates discretion must provide determinate criterion for saying how much
regulation is too much.
iv. Whitman v. American Trucking Assn. – Reversing American Trucking case: A
statute is unlikely to be struck down as an impermissible delegation of authority
where there is any kind of guidance proffered. There is a strong presumption of
validity in delegations where any kind of guidance exists. Delegations work on a
sliding scale – a delegation affecting a small area requires less guidance than a
delegation affecting the entire nation.
g. Individual Rights and Liberties
i. Administrative agencies CANNOT have as broad of leeway in the arena of
individual freedoms (cannot intrude on freedoms that we pride ourselves on as
Americans). The USSC & circuit courts will be less inclined to uphold
discretionary types of delegations of power when a person’s personal liberty is at
issue.
ii. The legislature can act on these freedoms; it’s just the agencies that cannot.
h. State Delegation
i. Federal law is not the only law on delegation; it’s important to differentiate state
delegation from federal delegation.
ii. States judges may be stricter with their approach to delegation (powers given to
administrative agencies) than federal judges. Most state courts are more
aggressive than federal courts in reversing delegations where standards to govern
the exercise of authority have been vague, although some state courts have
followed the more permissive modern federal approach.
1. GENERAL RULE—The federal government is MORE likely to defer to
the administrative agencies. States have more distrust whereas the
federal government is more like “we are all part of the government.”
iii. State v. Broom – Definition of Crimes Not Delegable – A state cannot delegate
the right to define felony offenses to administrative bodies or department heads.
iv. United States v. Grimaud—If the enabling statute contains a criminal sanction, it
will attach if someone violates the rules. The agency will promulgate if a
violation occurs.
v. Waterfront Estate Development v. Palos Hills—Statute was void as
unconstitutional delegation due to lack of standard to guide the commission.
Court found no intelligible principle to guide agency discretion when it struck
down an agency rule that prohibited building development plans that were
inappropriate for the neighborhood, i.e. they were going to be able to say whether
the building was or wasn’t ugly and if it was, it didn’t belong.
vi. Highland Farms Dairy v. Agenew – GREAT EXAM QUESTION – Supreme
Court has held that the scope of state delegation does not raise federal
constitutional issues.
3. Judicial Power [Adjudication]
a. The United States Constitution and Judicial Power—At one point, there was a
vigorous dispute as to whether the legislature could delegate judicial power to
administrative agencies. NOW, the practice of delegating judicial power has become
widespread. The delegation of quasi-judicial power has been generally upheld despite
separation of powers objections.
i. Thomas v. Union Carbide Agricultural Products – Binding Arbitration –
When Congress is acting for a valid legislative purpose pursuant to its
constitutional powers under Article I, it may create a seemingly private right that

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is so closely integrated into a public regulatory scheme as to be a matter

appropriate for agency resolution with limited involvement by the Article 3
judiciary.
ii. Worker’s Compensation Cases
1. Permissibly resolved by administrative agencies; no absolute right to be
heard by an Article 3 court/judge.
2. It would make things very difficult if we took worker’s compensation
issues away from agencies; leading case is Cronwell.
3. If a private right (between you and an individual) is closely integrated
into a public regulatory scheme, then there is no right to be heard by
Article 3 court/judge; can be adjudicated by administrative agency and
there is no right to a jury trial.
iii. Granfinanciera S.A. v. Norberg – Right to a Jury Trial – Unless a legal cause of
action involves “public rights,” Congress may not deprive parties of the 7th
Amendment guarantee to a jury trial; “public right” usually involves you and the
government. Congress lacks the power to strip parties contesting matters of
private right of their constitutional right to a trial by jury.
1. This case deals with public rights/private rights.
2. The fraudulent conveyance suit is more a private than a public right, so
a defendant is entitled to a jury trial upon request.
3. The crucial question is whether Congress, acting for a legislative
purpose pursuant to its constitutional powers under Article I, has created
a seemingly private right that is so closely integrated into a public
regulatory scheme as to be a matter appropriate for agency resolution
with limited involvement by the Article 3 judiciary.
4. If the statutory right is NOT closely intertwined with a federal regulatory
program AND the right neither belongs to nor exists against the federal
government, then it must be adjudicated by an Article 3 court. And if it
is a LEGAL RIGHT, the parties are guaranteed a jury trial.
5. Analysis to determine if something is legal or equitable in nature (thus
deciding if a jury trial is required)
a. Compare the statutory action to 18th Century action brought in
the courts of England prior to the merger of law and equity
courts; and
b. Examine the remedy sought and determine whether it is legal or
equitable in nature.
6. Balance the Factors: If the 2 factors indicate that a party is entitled to a
jury trial under the 7th Amendment, decide whether Congress may assign
and has assigned resolution of the relevant claim to a non-Article 3
adjudicative body that does not use a jury as fact-finder.
b. State Constitution and Judicial Power
i. Right to Jury Trial: Congress’ power to deny a trial by jury is not permissible in
wholly private tort, contract, and property cases (i.e. not closely integrated with a
public regulatory scheme).
ii. McHugh v. Santa Monica Rent Control Board – Administrative Adjudication is
Not a Judicial Function; case stands for the notion that exercised powers must be
reasonably necessary and judicial review cures all
1. Reasonable Necessity/Legitimate Regulatory Purpose Test – An
administrative agency may constitutionally hold hearings, determine
facts, apply the law to those facts, and order relief including certain types
of monetary relief (i.e. powers of the judiciary), so long as:

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a. Such activities are authorized by statute or legislation and are

reasonably necessary to effectuate the administrative agency’s
primary, legitimate regulatory purposes, AND
b. The essential judicial power (i.e. the power to make binding
judgments enforceable) remains ultimately in the courts, through
review (judicial review) of the agency determinations.
2. Holding: The administrative adjudication is constitutionally valid.
a. Guidelines Met: D heard complaints that P charged excess rents
and determined that P in fact had done so. These actions were
reasonably necessary to accomplish D’s primary, legitimate
regulatory purposes of setting and regulating minimum rents in
the local housing market. D does not adjudicate other types of
disputes, so it has not violated the limiting principles.
b. No Right to Jury Trial: No right to a jury trial exists as to
adjudication of a matter otherwise properly within the regulatory
power of an administrative agency. Therefore, P’s claim that
administrative adjudication of monetary relief violates the right
to a jury trial does not hold up. Even applying the federal
“private v. public” approach, interests in rent control are public
rights.
iii. Note on Punitive Damages: Agencies aren’t allowed to make types of decision
on punitive or emotional damages.
1. Caveat: In Konig v. Fair Employment and Housing Commission, an
award of emotional distress damages by a state agency was upheld.
iv. Constraint on Agency Abuse—Tremendous powers of the legislature,
executive, and judiciary have been conferred upon the “headless fourth branch”
of government, including the adjudication of valuable interests and the
imposition of sanctions.
v. Two Viewpoints on Separation of Powers - Adjudication of Traffic Offenses
1. Watergate Compartment Theory
a. Judicial power may be exercised only by the court. The use of
para-judicial officers questions the legality of the adjudication.
b. Traffic cases should be decided within a unified court system in
the judicial branch; anything else would violate the concept of
separation of powers.
2. Blended Powers Theory
a. Blending of powers is accepted because of the system of checks
and balances. Blending of powers is not prohibited, but total
submission of one power to another is forbidden.
b. The “headless fourth branch” of government is subject to
checks on its abusive use in that –
i. The legislature may modify or withdraw its authority,
and
ii. The judiciary may ordinarily modify, reverse, or remand
the agency’s initial determination if it does not comply
with the enabling legislation (i.e. administrative
adjudication subject to judicial review).
vi. Rosenthal v. Hartnett – Adjudication of Traffic Infractions – Administrative
adjudication of traffic infractions is authorized in cities of over one million in
population but not allowed to impose imprisonment.

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c. Remedies and Penalties

i. Introduction—A statute that delegated legislative power normally specifies a
penalty for violation of the statute or regulation promulgated pursuant to the
statute.
ii. Remedies—Administrative agencies cannot provide all the remedies that a court
of law may provide. If an agency awards money damages to an aggrieved party,
only the courts can execute the judgment.
iii. Vainio v. Brookshire – Remedies/Agency Adjudication without Jury Trial
1. Remedies (Damages) Rule – Agencies may award damages but it must
be reasonable and reviewable by the courts under abuse of discretion
standard.
2. A jury trial for damages is ONLY guaranteed in common law but not
rights created by a statute.
iv. In re Investigation of Lauricella – Remedies/Injunctions – General Rule –
Agency does NOT have authority/power to impose felonies, to throw you into
prison, or to impose contempt. Agency DOES have power to impose fines or
power to charge rent.
1. NOTE: Courts can issue injunctions; similar power to issue cease and
desist orders have been delegated to most regulatory agencies.
v. Texas Association of Business v. Texas Air Control Board – Penalties and
Fines—Legislature may grant an administrative agency the authority to impose
civil fines directly without resorting to the courts.
d. Other Information on Penalties
i. For penalty power to exist in an agency, there must be an express legislative
delegation.
ii. The Immigration and Naturalization Service (INS) possesses power not only to
make decisions that drastically affect the persons of those subject to its
jurisdiction but also has the power directly to execute its own decisions. After a
deportation order is issued, the alien is given an opportunity to leave the country
voluntarily. If he refuses to do so, the INS has the authority to execute the order
by physically ejecting the alien (but CANNOT impose imprisonment).
_____________________________________________________________________________________
INVESTIGATIONS AND PRIVACY
1. Introduction—as decisional bodies, agencies require adequate information upon which to base
conclusions that best serve legitimate public interest concerns.
a. The means of acquiring such information fall into three categories –
i. Requiring reports;
ii. Inspection of documents or facilities; and,
iii. Subpoena of documents and witnesses.
b. There are two broad avenues for obtaining information
i. Voluntary Disclosure—an agency can request, and parties will often provide,
information on a voluntary basis. VD is a surprisingly common phenomenon.
ii. Compulsory Disclose
1. Searches/Inspections – agencies may sometimes conduct searches or
inspections. In doing so, the agency may need to first obtain a search
warrant.
2. Issuance of Subpoena – agency can compel testimony/production of
documents
c. Once an agency acquires information, privacy issues arise—agency may be
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(FOIA). FOIA contains exemptions from disclosure but they may not apply to the
acquired information.
2. Investigations—most agencies have broad authority to conduct investigations. Investigations
generally seek to determine whether violations of the statutory framework have occurred. In
conducting an investigation, this does not mean, however, that the agency must have a
particularized belief that a violation has occurred.
a. May investigate if . . .
i. “Suspicion” that law is being violated;
ii. “Assurance” that the law is not being violated.
b. Once investigation begins . . .
i. Investigatory authority broadly construed;
ii. Stringent limitations on authority of subject to destroy records (Sarbanes-Oxley
(18 U.S.C. §1519)).
iii. Criminal penalties if records destroyed during or in contemplation of
investigation
c. Voluntary Disclosure—obtaining information during an investigation through simply
requesting and receiving the necessary documents and testimony. Sometimes an agency
has no choice but to get information this way; the agency lacks the statutory authority to
compel disclosure.
i. Effects of Voluntary Disclosure on Attorney-Client Privilege and Work Product
Doctrine
1. No Selective Waiver – a party waives ACP and WPD, as to third-party
civil litigants, by releasing privileged materials to federal agencies in the
course of the agencies’ investigation (1st, 3rd, 6th , and D.C. Circuits: there
is also no selective waiver in healthcare cases).
2. Selective Waiver in All Situations
3. Some Selective Waiver – selective waiver is permissible in situations
where the government agrees to a confidential order (8th Circuit).
d. Compulsory Disclosure—occurs where the agency seeks information through a
mandatory process. The particular methods available to an agency depend upon the
authority in the statute. Nothing in the APA provides the substantive authority to compel
disclosure. Compulsive methods range from on-site visits (including searches,
inspections, and examinations), and the compelling of testimony or documents (usually
pursuant to a subpoena).
i. INSPECTIONS, EXAMINATIONS, & SEARCHES
1. Administrative Warrants—the standard for obtaining an administrative
warrant is different from that needed for a criminal warrant.
Administrative warrants are based on reasonableness and public interest
(no need to have specific knowledge of one particular dwelling to satisfy
probable cause). Camara v. Municipal Court of the City and County of
San Francisco.
a. Balancing-Test—compare the governmental interest that
allegedly justifies official intrusion upon the constitutionally
protected interests of the private citizen.
i. Government interest = public health, safety, aesthetics
2. Scope of Administrative Warrants—the warrant must be narrowly
tailored (particularity requirement). If an administrative agency wants a
more intensive inspection warrant (like going to closets/drawers), then
there must be more specific evidence described in the application. A
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identify the authority on which inspections are conducted. See

Platteville Apt. v. Platteville.
a. Plain-View Doctrine—if, during the execution of an inspection,
there is incriminating evidence in plain view, the doctrine
applies.
3. Public School Official’s Search—in T.L.O., the Court recognized that the
school setting “requires some modification of the level of suspicion of
illicit activity needed to justify a search,” and held that searches by
school officials need only be supported by reasonable suspicion. See
Safford Unified School District #1 v. Redding.
a. Search is permissible if…
i. Measures reasonably related to objectives;
ii. Not highly intrusive in light of the sex and age of the
student and the nature of the infraction.
4. Exception to Warrant Requirement – Pervasively Regulated Business
a. Lower expectation of privacy in commercial premises. The
search is reasonable if…
i. These must be a “substantial” government interest that
informs the regulatory scheme pursuant to which the
inspection is made.
ii. The warrantless inspections must be “necessary to
further [the] regulatory scheme.”
iii. The statute’s inspection program must provide a
constitutionally adequate substitute for a warrant. I.e.,
the regulatory statute must perform to basic functions of
a warrant:
1. It must advise the owner of the commercial
premises that the search is being made pursuant
to the law, and
a. The statute must be “sufficiently
comprehensive and defined that the
owner of the commercial property
cannot help but be aware that the
property will be subject to periodic
inspections untaken for special purposes
2. It must limit discretion of the inspecting officers.
a. In limiting inspectors’ discretion, the
statute must be “carefully limited in
time, place, and scope.”
b. Licensing alone is not enough to determine if something is
closely regulated or not.
3. Subpoenas—the subpoena is an official order directing an individual to give information, either
in the form of testimony (subpoena ad testificandum) or documents (subpoena duces tecum).
Statutory delegation is necessary for agencies to possess subpoena power (source may be
enabling statute or general statute granting power to issue).
a. Challenging a Subpoena—subpoenas may be challenged in a judicial proceeding prior
to enforcement. The actions are initiated by a refusal of the subpoenaed party to comply;
the agency typically files an action seeking enforcement. The non-complying party bears
the burden.
i. Two Grounds for Challenge
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2. It violates affirmative legal restrictions.

b. Texas Lawyers Insurance Exchange v. Resolution Trust Corp.—Pre-enforcement
challenges to administrative subpoenas are dismissed for lack of subject matter
jurisdiction. Defendant must resort to judicial enforcement of its subpoena before
plaintiff can challenge its refusal to comply (because defendant’s subpoena is not self-
executing). Plaintiff’s noncompliance with the subpoena prior to judicial action does not
subject plaintiff to prosecution when the subpoena is attacked in good faith.
c. Fishing Expeditions – U.S. v. Morton Salt
i. We do allow a fair amount of fishing. To the extent agencies are to be denied the
authority to engage in “fishing expeditions,” the most appropriate method is to
impose limits on subpoena authority in the enabling statute.
ii. An agency can investigate merely on suspicion that a law is being violated or
even just because it wants assurances that the law isn’t being violated.
iii. To satisfy the 4th Amendment, the inquiry must be within the agency authority,
the demand is not too indefinite, and the information sought must be reasonably
relevant.
iv. Broadness alone is not sufficient justification to refuse enforcement of a
subpoena.
d. Enforcement—courts will enforce an administrative subpoena if . . .
i. The subpoena is within the statutory authority of the agency;
ii. Information sought is reasonably relevant to the inquiry; and,
iii. Demand is not unreasonably broad or burdensome.
e. The 5th Amendment, Self-Incrimination, and Subpoenas
i. Compelled testimony that communicates information that may “lead to
incriminating evidence” is privileged even if the information itself is not
inculpatory.” Doe v. United States.
1. A party’s act of producing documents (attesting to their existence and
where they were held) necessarily involved testimonial acts.
4. Privacy and Access to Information—government agencies often possess large amounts of
information about individuals and businesses. Much of the information is acquired in the course
of investigations. In some instances, disclosure could cause harm, or constitute an invasion of
personal privacy. Agencies are not free to disclose this type of information without limit.
a. Disclosure Concerns
i. Freedom of Information Act (FOIA and E-FOIA, 5 U.S.C. §552)
1. FOIA is a mechanism for compelling agencies to release information.
2. FOIA, however, contains exemptions form the requirement of mandatory
disclosure, including one for personal privacy, another for trade secrets,
another for pending investigations, and another from confidential
information.
ii. Privacy Act of 1974 (5 U.S.C. §552a)
1. The Privacy Act contains restrictions on an agency’s ability to disclose
information. Unless subject to an exemption, information can only be
disclosed after notifying the affected individual and obtaining written
consent.
2. The Privacy Act also allows individuals to access agency records and
ensure their accuracy.
iii. U.S. Constitution
1. The constitution protects informational privacy to some degree, but the
right is not well developed; find it nowhere and everywhere – it’s a
penumbra.

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b. FOIA—makes government records “available to any person,” not just a party in an

agency proceeding. An individual is given a legally enforceable right of access to
government files and documents and one not limited to those needed for litigation in an
actual case.
i. General Policies
1. The general rule is DISCLOSURE (not the exception);
2. All individuals have equal rights to access;
3. The burden is on the government to justify the withholding of a
document, not on the person who requests it;
a. Can satisfy this by showing that the records fall within one of the
nine exemptions, or the government argues that there is a
compelling reason not to disclose.
4. That individuals improperly denied access to documents have a right to
seek injunctive relief in the courts; and,
5. That there be a change in government policy and attitude.
ii. Exemption (Personal Privacy)
1. National Archives and Records Administration v. Favish—FOIA
recognizes surviving family members’ rights to personal privacy with
respect to their close relative’s death-scene images.
a. Balancing Test (in order to withhold information form the
public)—Where the privacy concerns addressed in exemption
7(C) are present, the exemption requires the person requesting
the information to establish a sufficient reason for disclosure:
i. The citizen must show that the public interest sought to
be advanced is a significant one; an interest more
specific than having the information for its own stake.
ii. The citizen must show the information is likely to
advance that interest.
b. Note—If both of the above cannot be shown, then the invasion is
unwarranted.
c. The Privacy Act
i. Doe v. Chao—in order to collect money damages under the Privacy Act, actual
damages/injury (quantifiable) must have occurred.
d. Privacy and the U.S. Constitution—privacy right to personal information come from
the Constitution, but to what extent remains unknown.
i. Whalen v. Doe—constitution protects the privacy of some kinds of personal
information.
1. There are two kinds of privacy interests: (1) individual interest in
avoiding disclosure of personal matters; and (2) interest in independence
in making certain kinds of important decisions. Here, the state law
disclosure of medical information by doctors to agencies is not de facto
impermissible invasion of privacy because states are free to make laws
requiring disclosure of some information.
ii. Doe v. Delie—privacy issues in the context of prison
1. Prisoner did have a due process right to privacy, but defendants had
qualified immunity. A prisoner’s right to privacy in his medical
information is not fundamentally inconsistent with incarceration.
However, the prisoner’s right to privacy of medical information is not
the same as a free person’s right.
a. An inmate’s constitutional right to privacy may be curtailed by a
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legitimate penological interests. The right to privacy of medical

records is reduced.
iii. Other information that is disclosed might violate constitutional right to
informational privacy
1. VIN number
2. Email
3. DNA
_____________________________________________________________________________________
RULES AND RULEMAKING
1. Terminology and Rulemaking
a. APA Definition of “Rule” (5 US.C. §551(4))
i. Whole or part of agency statement
ii. General or particular applicability
iii. Future Effect
iv. Designed to implement, interpret, or prescribe
1. Law or policy, or
2. Organization, procedure, or practice requirements
v. Includes
1. Ratemaking, wages, financial structures or reorganization, prices,
facilities, appliances, services, or allowances; or, of valuations costs or
accounting, or practices bearing on any of the above.
b. APA Definition of “Rulemaking” (5 U.S.C. §551(5))—Agency process for formulating,
amending, or repealing a rule (includes legislative and interpretations).
i. Rulemaking involves an agency’s exercise of its quasi-legislative powers in the
promulgation of prospective standards of conduct; it is prospective in nature; it
prescribes future standards of conduct rather than consequences of past conduct.
1. Rulemaking usually impacts the rights of a large number of people in the
abstract. A subsequent proceeding is ordinarily required before an
individual will be sanctioned for its violation.
2. Identified By . . .
a. General Application – rulemaking is usually applied generally to
all persons who fall within its provisions. This is to be
distinguished from an order, which applies to named persons and
specific factual situations; and
b. Prospective Application – before a rule is made directly
applicable to a named individual, a further proceeding is
required. Hence, the rule declares standards for future conduct
rather than the consequences of past conduct. Rulemaking is
somewhat analogous in this respect to legislation, which is also
ordinarily of prospective effect.
3. Procedure—the procedural obligations for rulemaking are usually
informal, consisting of the disposition of the proceeding on the basis of
the written record.
4. Difference Between Substantive Rule and Interpretations—if it is
substantive, notice and public comment are needed, which takes time.
c. APA Definition of “Order” (5 U.S.C. §551(6))—means the whole or part of a final
disposition, whether affirmative, negative, injunctive, or declaratory form, of an agency
in a matter other than rule making but including licensing.
i. Determines liabilities upon the basis of present or past facts; applies to specific
individuals or situations; it is the end result of adjudication.

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d. APA Definition of “Adjudication” (5 U.S.C. §551(7))—means agency process for the

formulation of an order.
i. Adjudication involves the performance of its quasi-adjudicatory powers, in the
resolution of issues that usually involve factual situations occurring at some
prior point in time.
1. Adjudication ascribes legal obligations based on present or past conduct;
adjudication usually applies immediately to named person or specific
factual situations.
2. Procedure—the procedural obligations for adjudication are more
frequently formal, or trial-type in nature.
e. Differentiating Between “Rulemaking” and “Adjudication”
i. Rules/standards are legislative in nature
1. If you are setting up guidelines or guidance, then it’s a rule (legislative).
2. If the matter is determined to be a rule, then APA rulemaking procedures
must be followed.
3. This is WHAT THE LAW WILL BE.
ii. Adjudication is the resolution of a dispute of facts.
1. If you have a hearing to resolve a dispute and something comes out of it,
it’s part of the adjudication process and it’s an order.
2. If it’s an order, i.e. adjudication, then the rulemaking procedures need
not apply.
3. This is WHAT THE LAW WAS.
f. Determining What is a Rule, Cordero v. Corbisiero
i. An administrative agency’s policy is a “rule” if it is a general principle applied
without regard to the facts and circumstances of the individual case. If the policy
is actually a rule, it must be formally promulgated pursuant to the rulemaking
procedures set forth in the state APA.
1. In Codero, the policy fits the definition of a rule – agency’s policy has
general applicability (without looking at the facts or circumstances which
applied to all jockeys) that prescribes a procedure or practice requirement
of the agency. The policy establishes a mandatory procedure that
pertains only to when and where a suspension must be served in the
event of an appeal.
2. Rules
a. Substantive/Legislative Rules—a rule is substantive in nature if it creates a right,
assigns duties, or imposes obligations. They are analogous to statutes, in that they
prescribe standards for the future, and their violation may result in the imposition of
appropriate sanctions.
i. Effect—legislative rules have the force and effect of law – intended to be binding
on the agency and the public
ii. Notice and Comment—substantive rules are subject to the Notice and Comment
requirement of APA §533.
1. Notice of Proposed Rulemaking – must be given at least 30 days before
going into the rulemaking phase (this is NOT a hard and fast rule,
though).
iii. Rulemaking Authority—an agency may have rulemaking authority but it must
not be arbitrary, capricious, or inconsistent with the Act, and it must provide for
review or individual regulations on that basis in district court
1. In re Permanent Surface Mining Regulative Litigation—a general
rulemaking provision may serve as a basis for the promulgation of
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a. Courts willingly uphold substantive regulations based on general

rulemaking authority even when specific rulemaking powers
exist. Courts favor rulemaking over adjudication as the more
desirable means of developing agency policy, because
rulemaking constitutes an efficient and effective means of
regulating enterprises subject to agency jurisdiction.
b. Other Types of Rules/Nonlegislative Rules
i. Interpretive Rules and Policy Statements—not subject to the promulgation
requirements of the APA (do not have the force and effect of law)
1. Interpretive Rules (non-legislative)—rule or statements issued by an
agency to advise the public of the agency’s construction or interpretation
of the statutes and rules which it administers.
a. Restate or explain an existing law.
2. Policy Statements—statements issued by an agency to advise the public
prospectively of the manner in which the agency proposes to exercise a
discretionary power.
a. Do not exist upon legislation that has meaning.
3. Legal Effect
a. Substantive/Legislative Rules
i. General Rule—properly enacted regulations have the force of law, which means
that the rule or regulation has the same force and effect as a statute. An agency
issuing a legislative rule is itself bound by the rule until that rule is amended or
revoked. A legislative rule could only be repealed through notice and comment,
not through an adjudicatory proceeding.
ii. Housekeeping and Procedural Rules
iii. How Can an Agency Change a Rule?
iv. Retroactivity
1. See Bowen retroactive rule making, only through enabling statutes
b. Other Types of Rules/Nonlegislative Rules
i. Interpretive Rules—in contrast to substantive regulation, interpretive rules do not
have the force and effect of law. While they may explain the agency’s
interpretation of its enabling statute, they are normally not deemed binding on
either the agency or persons subject to its jurisdiction. However, many courts
view them as persuasive authority in interpreting the statutes to which they relate.
4. Cost-Benefit Analysis
5. Publication
a. Federal Register: Since 1955, federal law has insisted that all federal agency rules and
regulations be printed in the Federal Register, which is published every working day.
Such publication is a condition precedent to the legal effectiveness of any rule or
regulation, UNLESS the parties affected have actual knowledge thereof.
i. Prior to being published, the rule is pending.
ii. If the rule is not published, then it is NOT valid against any person who has not
had actual knowledge of the rule.
iii. Publication is MANDATORY for legal effectiveness EXCEPT in those rare
occasions where actual knowledge can be proved.
b. Code of Federal Regulations: The Code of Federal Regulations is an annual, indexed
compilation of all federal rules and regulations promulgated. Hence, once the rule or
regulation becomes final, it is ordinarily published in the annual volumes of the Code of
Federal Regulations.
c. Effect of Publication: The proper publication of federal agency rules and regulations
results in constructive notice to the world. Their provisions irrespective of whether they

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have actual knowledge of the rules’ existence bind all persons to whom such regulations
apply. Contradictory information supplied by a federal official does not alter the strict
language of a properly published rule or regulation.
d. States: Most states have specified a central state office for the filing of all state
regulations and have provided for their periodic compilation and publication. But no
state follows federal approach of daily publication of agency rules and regulations.
e. Federal Crop Insurance Corp. v. Merrill – Erroneous Information: Publication is
everything! If the government publishes it, you are deemed to know about it, even if
knowing about it is ridiculous.
6. Estoppel
a. General Rule: Erroneous or unauthorized advice given by an agency official that
contradicts a binding regulation is usually insufficient grounds upon which to sustain a
case of estoppel against the government.
b. Office of Personnel Management v. Richmond – Estoppel in Favor of the Government:
Equitable estoppel is not available to private litigants in suits against the government,
especially those cases seeking money, implicating the Appropriations Clause. If you
could sue the government every time the agency gave out misinformation, it would clog
the court system and would be chaos.
c. A Different View on Estoppel (Since the Richmond Case):
i. Brandt v. Hickel: Estoppel should be invoked against the government where the
erroneous advice was in the form of a crucial misstatement in an official
decision.
1. This is the more modern trend – granting estoppel; move toward being
more reasonable and not so harsh with people.
ii. Gilmore v. Lujan: Appellant must demonstrate affirmative misconduct on the
part of the government that goes beyond mere failure to inform or assist.
7. Rulemaking Procedure
a. Federal APA §553 – Procedural Obligations of Informal Rulemaking: Defines the
procedural obligations applicable to most rulemaking proceedings; has been driving
administrative law in our country since 1946.
b. Notice: Notice of proposed rulemaking must be published in the Federal Register, unless
relevant parties have actual notice. [5 USC §553(b)]
i. The notice shall include –
1. A statement of time, place, and nature of public rulemaking proceedings;
2. Reference to the legal authority under which rule is proposed;
3. Either the terms or substance of the proposed rule or a description of the
subjects and issues involved.
ii. Exceptions to the Notice Rule
1. Interpretive and procedural rules (non-legislative rules), a well as
general statements of policy, are exempt from the requirement of
publication.
2. Good Cause Exception: Situations where the agency finds it
“impracticable, unnecessary, or contrary to the public interest” (i.e.
inconvenient or unnecessary) are exempt from notice and comment
period.
c. Notice-and-Comment Procedures: Parties have a right to participate through
submission of written pleadings, with or without the opportunity to advocate their
position or introduce evidence orally. More formal procedures are available only if the
“rules are required to be made on the record after opportunity for an agency hearing.” [5
USC §553(c)]

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i. Why do you have this “comment” period? Procedural due process – have to give
notice and opportunity for people to be heard. People are heard through
commenting, which meets the procedural due process requirement.
ii. Generally, you have to have oral hearing, but not always. There is no particular
order for comment.
d. Publication: Publication or service of a substantive rule must ordinarily be
accomplished 30 days prior to its effective date.
e. APA is Both a Ceiling and a Floor: In reviewing procedures offered by an agency
under the APA, courts are ordinarily not free to impose procedural requirements beyond
those specified in the APA. Nor may agencies offer less than the procedural minimums
expressed therein. But an agency is free (without judicial coercion) to offer more than
the minimum procedural requirements if it so chooses.
f. What happens if §553 requirements are not met? The agency rule is struck down for
violating §553 and is treated as invalid; previous rule will be reinstated.
g. What if the notice of the proposed rulemaking doesn’t cover what the rule actually
ends up being?
i. Logical Outgrowth Test: Does the promulgated rule look as if it is a logical
outgrowth of the noticed subject?
ii. Example: Sugar content in cereal was subject to notice and rule ended up
deciding how much sugar could go into milk. This fails logical outgrowth test.
h. Jifry v. FAA – Exception to Notice and Comment (Good Cause Exception): APA
requires an agency to publish general notice of proposed rule-making and afford an
interested person to participate. Plaintiff claimed that FAA violated this rule because
there was no notice and comment. The Good Cause Exception excuses notice in
emergency situations OR where delay could result in serious harm.
i. Vermont Yankee Nuclear Power Corp. v. Natural Resources Defense Council –
LEADING CASE, a Must Know! If agency has followed APA, they have done their
part. There are minimal standards and as long as those minimal standards are followed,
that is good enough. The minimum procedures are through 553 of the APA. Under
certain circumstances, the court can impose greater requirements than those required
through the APA. These circumstances are below. It’s not the court’s job to step in and
make additional requirements to the APA (restriction against Courts imposing
rulemaking procedures beyond those required by statute).
i. Holding: The agency provided proper procedures and didn’t need to do anything
else. The APA expresses the maximum procedural requirements that Congress
was willing to have the judiciary place upon agencies. While agencies are free to
offer greater procedural opportunities, the courts are not free to insist that they
do.
1. Exceptions may exist when . . .
a. The agency is deciding a controversy involving a small number
of person, each exceptionally affected upon individual grounds;
b. The agency makes a “totally unjustified departure from settled
agency procedures of long standing;”
c. Constitutional due process may require more procedural
opportunities than those specified in the APA; or
d. Exceptionally compelling circumstances exist.
j. Formal v. Informal Rulemaking
i. Informal: §553 of APA
ii. Formal: Begins with §553(c) and then covers §556 and §557 of the APA
iii. RULE: Although a statute does not have to quote section 553 to require formal
rulemaking, there must be a clear expression of congressional intent to do so.

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Otherwise, the courts will assume that Congress intended the agency to conduct
informal rulemaking. The rationale is that formal rulemaking is a costly process
that does not add much to the agency’s ability to make good decisions.
iv. United States v. Florida East Coast Railway – “After Hearing” is Not
Synonymous with “On the Record.” Unless a statute dictates that rules be
adopted after a hearing “on the record,” no formal hearing is required. Terms
like “must hold public hearing” are not sufficient – it needs to say “on the
record.”
k. Prejudgment—Although prejudgment bias constitutes grounds for disqualification of the
decision-maker when quasi-adjudicative procedures are mandated, neutrality and
detached objectivity are not strictly insisted upon in quasi-legislative proceedings.
i. Rule: Public opinion from an agency official does not constitute a basis for
disqualification of rulemaking proceeding on the matter.
ii. Exception: Official is only disqualified upon clear & convincing evidence that
he has an unalterably closed mind on matters critical to disposition of the
rulemaking.
iii. Rationale: Agency officials are not like judges; they are like legislators whose
opinions and views should be considered and encouraged.
iv. Association of National Advertisers v. FTC – Agency Official’s Public
Expression of Opinion on the Issue
1. Administrative action under APA is either adjudication or rulemaking; it
cannot be a hybrid. The nature of the proceeding in this case is
rulemaking because it is directed to all members of an affected industry
and is based on legislative fact. Administrators in rulemaking
proceedings must be impartial, but this does not mean they must be
uninformed or without opinions. A rulemaker may not be disqualified
unless there is a clear and convincing showing that he has an unalterably
closed mind on matters critical to the disposition of the rulemaking. P
did not make such a showing in this case.
l. Additional Procedures – Regulatory Flexibility Act (RFA)
i. Major Rules = cost-benefit analysis. Rules affecting small business, apply RFA.
ii. §604 – Final Regulatory Flexibility Analysis: When an agency promulgates a
final rule under §553 (after publishing general notice of proposed rulemaking, or
promulgates a final interpretive rule involving the internal revenue laws of the
U.S. described in 603(a)), the agency shall prepare a final regulatory flexibility
analysis.
iii. The Remedies that Exist For Agency’s Failure to Enforce/Issue a RFA are…
1. Remand the rule back to the agency, and
2. Defer enforcement of the rule against small entities unless the courts find
that continued enforcement of the rule is in the public interest.
8. Rules Versus Orders
a. Two Fundamental Questions when Dealing with a Rule v. Order Problem:
i. Does the agency have a choice between proceeding by rulemaking or
adjudication?
ii. Must the agency announce a new rule/law prospectively by rulemaking power
and restrict particular rights only through adjudicatory proceedings?
b. General Information
i. An agency can choose to proceed by rulemaking or adjudication if the agency
has authority to do both.
ii. Agency cannot adopt a rule in adjudication that would be an order or a principle.

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iii. Agency cannot promulgate a new rule in adjudicatory process without complying
with the APA.
iv. When a case is adjudicated, it is considered precedent.
c. NLRB v. Wyman-Gordon Co. – Rulemaking Through Adjudication
i. Agency must use rulemaking procedures to issue new/binding rule; cannot adopt
a rule for future application in adjudication, but can announce a new principle.
ii. While an agency may set forth principles in an adjudication (comparable to res
judicata), it cannot make substantive rules in an adjudication.
9. Negotiated Rulemaking—Courts like negotiated rulemaking; they are not going to stop it. The
problem with it, though, is getting everyone to agree. [NOT ON EXAM]
a. USA Group Loan Services v. Riley – Negotiated Rulemaking:
i. Facts: Congress required D to enter into “negotiated rulemaking” process before
promulgating any final rules. Negotiations were over the form and substance of
the regulations. Ps disagreed with proposed provisions, and P and D went into
negotiation. One of D’s officials promised to abide by any consensus reached
unless there were compelling reasons to depart. At one point, D made an offer
that P rejected, so D revoked the offer.
ii. Holding: The purpose of the negotiated rulemaking process is to reduce judicial
challenge to regulations by encouraging the parties to compromise on their
differences prior to the formal rulemaking procedure. It is unclear that D could
lawfully agree to be bound by the consensus results of the negotiations. It is not
bad faith for negotiator to revoke an unaccepted offer.
10. Rulemaking and the Internet
a. Section 206 of the E Government Act of 2002: There are numerous benefits to
negotiated rulemaking (e.g., reduction of judicial challenge, more expeditious rule
implementation, more economical process), and these can be enhanced by agencies that
post their advanced notices of proposed rulemaking on the Internet, allowing the public to
comment on or question the proposed rules.
b. The Good and The Bad
i. In terms of moving toward a democracy, the internet is great.
ii. In terms of what you want others to see, including what you complain about, it’s
not so great because it will be all over the internet. You have to be careful.
_____________________________________________________________________________________

RIGHT TO BE HEARD (ADJUDICATIONS)

1. Procedural Due Process Rights
a. Goal—determine whether you are dealing with rulemaking or adjudication. Look to
APA §554 for adjudication. If you are dealing with adjudication, then you have to deal
with due process.
i. Due process requirements apply to the procedures that must be used in reaching
agency determinations ONLY if they are adjudicative rather than rulemaking or
legislative in nature.
b. Constitution—the Fifth and Fourteenth Amendments guarantee that no person may be
deprived of “life, liberty, or property, without due process of law.”
c. Statutes—many statutes provide a right to be heard making constitutional analysis
relatively rare or unnecessary.
d. Components—the essential components of due process are notice and an opportunity to
be heard (hearing)
i. Hearing my be required for adjudication, but not always –
1. No hearing required when…
a. Issues of policy or law; or,

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b. For determination of generalized (legislative in nature) facts –

facts that are of general application; common to large groups of
people/business, which often arise in the course of rulemaking
proceedings.
2. Hearing required when…
a. For determination of individualized (adjudicative) facts – facts
about an individual/private party/business (who, what, when,
where, why); they often (but not always) require a determination
of credibility or state of mind and thus are suitable for trial-type
hearings.
e. Issue—when does due process require a hearing before agency action and what kind of
hearing does due process demand?
2. Legislative v. Judicial Functions
a. Three questions to ask when determining if legislative (no hearing) or adjudicatory
(hearing)
i. Whether the inquiry is of a generalized nature, rather than a specific,
individualized focus?
ii. Whether the inquiry focuses on resolving some sort of policy-type question
rather than merely resolution of factual disputes?
iii. Whether the result has “prospective applicability and future effect”?
b. Mi-Metallic Investment Co. v. Colorado—when a large number of individuals are affect
by an agency action, it is impractical that they each be given a hearing. The action in this
case (increase in value of all taxable property) was analogous to that regularly performed
by the legislature; there is no constitutional requirement that a hearing be held before
such action is taken.
c. Hollinrake v. Law Enforcement Academy—no hearing is required when decision is
based on legislative facts. A statute requiring a minimum eye requirement was
legislative. A hearing is required if an action involves the determination of disputed
adjudicative facts, which are facts of particular applicability under the circumstances.
Because the plaintiff does not dispute the results of the examination, there are no disputed
adjudicative facts.
i. Note—it would be different if the decision were based on “good moral
character.” A hearing would be required here because this is a particularized
question to an individual, which could be disputed.
d. Pure administrative processes where a hearing is NOT required—a hearing will NOT
be required in cases of pure administration process (cases where decisions are made on
the basis of observation by technical experts or objective tests), such as…
i. Decision made by agency solely on the basis of technical expertise or objective
tests (where there is no agency discretion except the application of a reasonably
precise standard to uncontroverted facts);
ii. Inspections;
iii. Tests;
iv. Elections; and,
v. Mechanical application of a mathematical formula
e. General v. Particular Rules—generally, even when a single party is affected by agency
rulemaking, the party may not be entitled to a formal hearing where the APA does not
require it.
i. In re Appeal of Stratton Corp.—procedural due process is not required
regardless of its impact on an individual if it is rulemaking or legislative in
nature. The statute in this case evinces a clear intent that the reclassification
process be a rulemaking proceeding resulting in a rule. This is not adjudicative

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because it is not based on particular facts concerning specific parties; instead, it

applies to al citizens.
3. Privileges (Pre-Due Process Revolution)—no process is due when the property interest being
denied by an administrative agency is deemed to constitute no more than a mere “privilege.” In
the past, the privilege concept was the dominant rule governing procedural due process.
a. Licenses—professional licenses have been deemed to constitute a “right” that could not
be denied without due process. Licenses of lesser distinction (e.g., liquor licenses) were
deemed to constitute mere “privileges” that could be either revoked or amended by
government at will. See Smith v. Liquor Control Commission.
b. Other Privileges
i. Immigration—An alien seeking admission to the United States has been deemed
to have no more than a “privilege” of entry, not a “right” and entry may be
restricted upon whatever grounds the government may choose to impose.
ii. Government Employment and Contracts—These have been regarded as
analogous to private agreements, where the contracting individual was held to
have no “rights” beyond those conferred by the contract. The result is that
neither the public employee nor the government contractor is protected by
procedural due process.
iii. Government Largess—Welfare dispensed by the government, too, was deemed
to constitute no more than a “privilege” and not a “right.”
iv. Conditional Limitations—Privileges could not only be revoked at will, they
could also be limited with such conditions as the government deemed desirable.
c. Times When it is Okay to Take Away a Privilege
i. Unconstitutional Limitations—Government could not deprive or limit privileges
on unconstitutional grounds (e.g. religious or racial discrimination).
ii. Arbitrary and Capricious—If there is arbitrary and capricious activity, the taking
away of the privilege without due process can be challenged.
4. Entitlements (Due Process Revolution)—procedural due process (notice and opportunity to be
heard) comes into play when the agency is giving a person a privilege or right, which has turned
into an entitlement. Treating certain government actions as mere privileges would lead to unjust
results. Courts began to hold that even though a person held no recognized “right,” government
could not deprive individual of a liberty or property interest without due process of law.
a. Important questions to ask to determine if procedural due process is required…
i. Has there been a deprivation of liberty or property?
ii. When must notice and a hearing be provided?
iii. What type (extent) of notice and hearing are required?
1. Use Mathews balancing test to analyze whether a particular element is
constitutionally required.
b. Goldberg v. Kelly—where a party is entitled to something by statute, even if it is a benefit
(like welfare benefits), an entitlement arise, which is a right protected by due process.
Termination of such benefits is state action. The extent of the process due to such
recipients depends on the balance between the recipient’s interest in avoiding the loss and
the government’s interest in summary adjudication.
i. If you are legally entitled to something like welfare benefits, then it is akin to a
property right requiring a pre-termination hearing under procedural due
process.
ii. The privilege concept was abandoned.
c. A Fair Hearing Need Only Have the Following Attributes…
i. Notice of the reasons for a proposed termination;
ii. A hearing at a meaningful time and in a meaningful manner;

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iii. The right to present evidence (both testimonial, typically under oath, and
documentary) and argument;
iv. The right to confront and cross-examine adverse witnesses;
v. The right to counsel, although the state need not furnish counsel in all cases;
vi. A decision resting on the legal rules and evidence adduced at the hearing, shown
by a statement of the reasons for the decision and the evidence relied on; and
vii. An impartial decisionmaker.
viii. Note—these (above) are the essential rights safeguarded in a judicial-type trial.
d. Brookpark Entertainment, Inc. v. Taft—a state cannot give its citizens the right to
deprive an owner of his property rights. Liquor licenses are property, which means
licensee must be afforded due process before revoking the license.
i. The fact that liquor licenses can be transferred, sold, and renewed shows that
they have pecuniary value to their holders – legal entitlement, and therefore, right
to a hearing before revocation.
ii. OVERRULED SMITH.
e. Exception to Goldberg—Immigration
i. U.S. citizenship entitles you to certain benefits. An alien seeking initial
admission to the U.S. acquires a privilege and has no constitutional rights
regarding his application. Once an alien gains admission, his constitutional
rights change; he then is entitled to a fair hearing when threatened with
deportation
f. Goss v. Lopez – (Hearing for School Suspension) Education is a property right, which
means due process must be given BEFORE (pre-hearing) depriving someone of
education. The level of procedural due process will vary with the punishment –
something less than a full evidentiary hearing may be sufficient for a relatively brief
suspension of 10 days or less.
i. There need not be an opportunity for representation by counsel, to confront or
cross-examine witnesses, or other ingredients of a formal hearing, at least for a
relatively brief suspension such as 10 days.
ii. Note, Though: A student whose presence poses a continuing danger to persons
or property, or even an ongoing threat of disrupting the academic process, may
be removed immediately, but then a hearing should follow as soon as possible.
g. Mathews v. Eldridge – Narrowing the Hearing Requirement—Evidentiary hearing is
NOT required BEFORE the termination of disability benefits.
i. Mathews Factors: To determine the extent of the procedures required, balance
the following factors –
1. The private interest that will be affected by the official action;
a. How is the timing of the hearing going to affect the person losing
the benefit, and in what magnitude will the claimant be affected.
b. Pre-termination hearing verses post-termination hearing.
2. The risk of an erroneous deprivation from the procedure used and the
likely reduction of that risk by requiring more or different procedures;
a. How effective these additional procedures would be and
3. The government’s interest (fiscal and administrative) in using the
required procedures as opposed to different procedures.
a. Look at fiscal and administrative burdens that the additional or
substitute procedure requirement would entail; cost-benefit
approach.
b. Note that if monetary benefits are involved (not welfare), a pre-
termination hearing is NOT required.

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ii. Note—The ruling in Matthews held that a PRE-termination hearing may not be
required when the Mathew balancing factors are applied. It did NOT hold that
no hearing is required, since claimants do have a statutory right to be heard.
Court held that a post-termination hearing met the requirements of due process
based on the balancing test.
h. Hamdi v. Rumsfeld – (Application of the Mathews Balancing Test)
i. The Court must weigh the governmental interest in confining enemy-combatants
against the individual liberty rights of the detainee. After due consideration, it is
not necessary to provide initial due process hearings for captures, but those who
must be detained further are entitled to further proceedings. The detainee must
have an opportunity to demonstrate that the government's factual assertions are
untrue.
1. Facts and circumstances are highly determinative in balancing test – the
private interest (freedom) and the risk of error (high) outweighed the
government interest (national security). He has a right to dispute (a
hearing).
2. The court held a citizen-detainee seeking to challenge his classification
as an enemy combatant must receive notice of the factual basis for his
classification before a neutral decision maker.
5. Narrowing Scope of Property and Liberty Interests
a. Property Interests—more than abstract need, desire, or unilateral expectation. Must
equal legitimate claim of entitlement and must not be discretionary; a benefit is not a
protected entitlement if government officials may grant or deny it in their discretion.
i. Examples
1. Applicants for disability benefits that are nondiscretionary, statutorily
mandated, should be afforded due process to such property entitlements.
See Cushman v. Shinseki.
2. Statutes cannot be interpreted literally (sometimes). Police officers are
afforded the discretion to enforcement a restraining order (deep rooted
and historical discretion given to police officers regarding arrests and
enforcement decisions). See Town of Castle Rock v. Gonzales.
b. Liberty Interests
i. Denial of tenure or employment itself does not meet the test; it does not violate
liberty rights. To be actionable, defendants’ conduct must be so stigmatizing that
it crossed defamation line to infringement on liberty interest. See Hedrich v.
Board of Regents.
ii. Disciplinary segregation in prison can trigger due process protections, based
upon length of confinement and conditions of confinement. Must exceed
discretionary confinement in duration or degree of restriction (substantial or
unusually harsh).
6. Waiver—having notice but failure to request a hearing results in waiver, thus allowing
assessment of civil penalties without a hearing. See National Independent Coal Operators v.
Kleppe (no opportunity for a hearing was requested even though the opportunity existed. No
request means effective waiver of their right to a formal finding of fact).
a. No formal decision or findings of fact without a hearing!
7. Postponed Hearings—where de novo opportunity for judicial review exists, an evidentiary
hearing at the administrative level may not be required. Hearing need not be held at any
particular phase of the proceedings as long as a hearing occurs before the order is finalized.
a. Where only “property rights” are involved, mere postponement of the opportunity to be
heard is not a denial of due process.

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8. Emergency Cases—Prompt action without a pre-suspension hearing is justified where . . .

a. An important government interest is at issue;
i. The government has an important interest in protecting bank integrity and
stability.
b. Coupled with the substantial assurance that the deprivation is not baseless or
unwarranted. See FDIC v. Mallen (interest in preserving bank stability and indictment
process meet both prongs).
i. When the indictment is filed, there is probable cause that the defendant
committed a felony involving dishonesty
9. Flexible Due Process
a. Ambiguous Standards: The United States Supreme Court has few concrete standards to
govern the question of what process is “due.” The lower courts have been left to struggle
with the constitutional question on an ad hoc basis, depending on the factual
circumstances present in each individual case. This flexible due process approach
requires a balancing approach, weighing the competing governmental and private
interests involved. Some courts engage in a cost-benefit analysis.
b. Degree of Hearing: The degree of hearing you are entitled to must be proportionate to
the amount that is at stake.
c. The Principle: Even where due process imposes a right to be heard, it does not
necessarily demand all the essentials of a judicial trial in every case.
d. The Supreme Court Test: Due process “merely requires a comparison of the costs and
benefits of giving the plaintiff a more elaborate process that he actually received.”
_____________________________________________________________________________________
EVIDENTIARY HEARINGS AND DECISIONS
1. Notice and Pleadings
a. APA §554(a): NOTICE
i. Notice must be timely given and contain sufficient information to allow the
individual a reasonable opportunity to prepare her case. The APA requires that
notice apprise the affected party of the “matters of fact and law asserted.” Hence,
it must not only advise her of the date and place of hearing, it must also inform
her of the substantive issues to be addressed.
ii. Defects in notice may be cured with evidence that the individual actually knew
the substance of the matters that would be adjudicated.
iii. Agency notice may be served by registered mail.
iv. Test to Determine Adequacy of Agency Notice—Whether it reasonably informs
the individual of the matters to be dealt with at the hearing; sufficient details.
b. Curing Defective Notice—Even though an agency’s initial notice may fail to specify all
the issues to be adjudicated, if the individual is subsequently given actual notice of
additional issues and an opportunity to present evidence in response thereto, she cannot
successfully challenge the notice as deficient, unless she was prejudiced either by delay
or by informality in the subsequent actual notice.
c. Pleadings are very specific and they must be followed to a tee or else you are out-of-
luck; margins, headings, font, etc., must be perfect.
d. Agency Cannot Change Theory of Case During Adjudication Without Notice
(Yellow Freight System v. Martin)
i. Agency must give notice with opportunity to be heard (essential elements of due
process) and cannot change theories midstream without giving respondents
reasonable notice of the charge. You have to tell people what they are charged
with.

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ii. Procedural due process requires notice and an opportunity to be heard. Section
554(b) of the APA provides that parties entitled to notice of any agency hearing
shall be timely informed of the matters of fact and law asserted. This means that
an agency must give the party charged a clear statement of the theory on which
the agency will proceed with the case. An agency cannot change theories
without providing reasonable notice, and especially cannot raise a related charge
after the hearing record is closed.
iii. Note—When you are “charged” with something, you are given notice.
2. Nature of Hearing
a. Formal Adjudication: Formal agency adjudication closely resembles a trial-type
hearing before a judge sitting without a jury.
b. Public Hearing: Ordinarily, due process requires a public hearing if formal adjudication
is mandated. However, a private hearing may be offered if necessary to protect the
interests of the affected individual.
i. There is strong policy favoring public trials for both agencies and courts.
ii. Note—Neither federal nor state constitution created a public right of access to a
professional disciplinary hearing, and no common law right of access to
professional disciplinary hearing exists.
c. Test For Whether There is a Constitutionally Based Public Right of Access:
i. Whether the place and process have historically been opened to the press and the
general public AND
ii. Whether public access plays a significant positive role in the functioning of the
particular process in question.
d. There is no public right of access to professional disciplinary hearings conducted
pursuant to state law. See Johnson Newspaper Corp. v. Melino (hearing on whether to
close a hearing involving a dentist who was a licensed professional under state law.
i. There is no historical basis for an open professional disciplinary hearing and
there is no showing that the public played a significant role in the licensing or
policing of professionals. Further, there is possibility of irreparable harm from
unfounded accusations.
e. Two-Part test to determine whether access is mandatory
i. Whether there is a public right of access under the Federal of State Constitution
ii. Whether there is a common-law right of access grounded in public policy
3. Counsel
a. Right to Representation by Counsel—An individual is ordinarily entitled to the
opportunity to retain an attorney. APA §555(b). However, this general rule does not
entitle a party in an agency proceeding to counsel provided at public expense.
i. Generally—In administrative hearings, you are entitled to counsel, but you are
NOT entitled to counsel paid for by the government.
ii. Investigatory Proceedings—There is no right to representation by an attorney in
investigatory proceedings that are non-criminal in nature.
iii. Representation by Non-Attorneys—Although licensed attorneys are free to
practice before almost all federal agencies, administrative practice is not limited
to lawyers. Several agencies allow non-lawyer practitioners to appear before
them. For example, the Interstate Commerce Commission administers an
examination, the successful completion of which allows non-lawyer
transportation practitioners to practice before the agency.
b. Statutory Provision—Statutes that prohibit the presence of counsel in certain contexts
have survived constitutional challenge.

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4. From Examiners to Administrative Law Judges

a. The One Who Decides Must Hear—In its seminal decision of Morgan v. United States,
the United States Supreme Court held that, in administrative adjudications, “the one who
decides must actually hear.” This statement is not to be taken literally, however, as the
court meant that the decision-maker need merely carefully consider the evidence and the
positions of the parties. He may delegate to subordinates the tasks of conducting the oral
adjudication, taking the evidence, and subsequently sifting and analyzing it. The
decision-maker need not actually hear and observe the witnesses. But he must consider
the evidence and render a decision based thereon. See Guerrero v. New Jersey.
b. Administrative Law Judges (ALJ) (§5362)
i. Civil Service Commission changed the title of hearing examiners to ALJs in
1972.
ii. The ALJ is the central figure in formal administrative adjudication.
iii. The ALJ’s roles are specified in the APA and include –
1. Administer oaths and affirmations;
2. Issue subpoenas authorized by law;
3. Rule upon offers of proof and receive relevant evidence;
4. Take or cause the taking of depositions;
5. Hold conferences for the settlement of issues;
6. Dispose of procedural requests or similar matters;
7. Question witnesses as necessary or desirable;
8. Consider the facts in the record, arguments or contentions made, or
questions resolved;
9. Determine credibility of witnesses and make findings of fact and
conclusions of law;
10. Make decisions on the basis of reliable, probative, and substantial
evidence on the record;
11. Take any other action authorized by agency rule that is consistent with
the provisions of the APA.
iv. APA specifies the authority of ALJs as presiding officers and also attempts to
insure their impartiality and independence.
c. APA §556: Hearings, Presiding Employees – There shall preside at the taking of
evidence –
i. The agency;
ii. One or more members of the body which compromises the agency; or
iii. One or more administrative law judges appointed under §3105.
1. Note that once an ALJ is hired by the agency, he can only be removed
for good cause.
d. §3105: Appointment of Administrative Law Judges
i. Each agency shall appoint as many administrative law judges as are necessary for
proceedings required to be conducted in accordance with §556 and §557 of this
title.
ii. They shall be assigned to cases in rotation so far as practicable, and may not
perform duties inconsistent with their duties and responsibilities as hearing
examiners.
5. Bias
a. Legal Bias—Bias that requires an adjudicator to disqualify himself.
i. The requirement of neutrality in adjudicative proceedings safeguards the two
central concerns of procedural due process:
1. The prevention of unjustified or mistaken deprivations and

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2. The promotion of participation and dialogue by affected individuals in

the decision-making process.
b. General Rule—A biased decision-maker is inconsistent with fundamental notions of
procedural due process. If you are entitled to a full evidentiary hearing, the APA says
you are entitled to an impartial decision-maker.
c. Three Types of Bias
i. Substantial Pecuniary (Financial) Interest—Anyone with a financial stake in the
outcome of the proceeding is deemed biased; this type of bias is not limited to
direct personal pecuniary gain, but can also exist when the adjudicating agency
stands to benefit substantially from a particular outcome.
1. Indirect Financial Interest—Agency member that could benefit
personally from the outcome of a case cannot conduct the hearing and
make decisions on the matter. See Gibson v. Berryhill.
ii. Personal Prejudice (Prejudgment)—One who has an irrevocably closed mind
about the particular facts involved or the culpability of the individual accused is
impermissibly biased. The potential for this type of bias is greater in
administrative procedures than it is in courts, because administrators typically
deal with one type of case and may be prone to having a disposition to view all
the cases as the same. Or they may have taken public positions on issues their
agency deals with.
1. Disqualifying Public Statements by Agency Official—An agency
official’s public statements regarding the merits of a pending case should
disqualify him from participating in administrative review of the case.
See 1616 Second Ave. v. State Liquor Authority.
iii. Cumulative Error—Combination of errors made render the hearing unfair.
1. A court may invalidate the results of an administrative hearing if it
concludes that the ALJ failed to provide a completely fair hearing.
Excessive concern with expedience, indifference, and the rest can
undermine the fairness of a proceeding. While no single error of the
ALJ’s would probably have forced a remand, the cumulative effect may
render a hearing unfair. See Rosa v. Bowen.
a. EXAM TIP—cite this case to show that someone is acting way
too extreme.
d. Difficulty of Proof—It is difficult to sustain a charge of prejudgment. Although the
decision-maker may have handled several similar proceedings involving the charged
individual or other persons, and ruled against them all, it still must be demonstrated that
the decision-maker is incapable of judging a controversy fairly on the basis of its unique
circumstances.
i. When asking for recusal, you must state specific reasons as to why; case-by-case
basis.
e. Rule of Necessity (Exception to Legal Bias Rule that an adjudicator tainted with legal
bias must disqualify himself):
i. Disqualification will not be permitted to destroy the only tribunal with power.
ii. When the disqualification removes the only tribunal that has jurisdiction over the
case, that tribunal may continue to sit; in such a case the right of the individual
gives way to the public interest in having the law enforced.
6. Combination of Functions
a. APA §554(d)—the APA prohibits agency prosecutors or investigators from either
deciding the case or advising the decision-maker ex parte. In other words, the APA
provides for internal separation of functions – separates those who investigate and
prosecute from those who hear and decide (at least at the initial level).

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i. This prohibition against commingling of functions pertains only to formal

adjudication. Rulemaking or informal adjudication is implicitly exempt.
ii. Exemptions
1. Agency Heads—an agency head may not be disqualified merely because
he supervised the investigation or prosecution of the case. The FTC’s
practice of reviewing the recommendations of its investigative
employees and then making the decision to initiate a complaint falls
within the exception.
2. Rulemaking—exempt from prohibition against commingling
3. Initial Licensing—also exempt.
4. Statutory Exemptions—Congress has, in legislation other than the APA,
separately allowed commingling in other contexts, such as deportations.
7. Evidence—agencies are not bound by the rules of evidence. If evidence satisfies the APA
standard, agencies may consider it.
a. APA §556
i. Oral or documentary evidence may be received
ii. Irrelevant, immaterial or unduly repetitious evidence may be excluded.
iii. Sanction, rule, or order must be based upon record evidence.
iv. Reliable, probative, and substantial evidence
1. More than a scintilla what reasonable mind would find adequate to
support the conclusion
a. Hearsay may be substantial
v. Permits party to present case or defense with oral or documentary evidence
vi. Can submit rebuttal evidence
vii. Cross examination to facilitate a full and true discloser of the facts.
b. Substantial Evidence—more than a scintilla; it means such relevant evidence as a
reasonable mind would find adequate to support the conclusion.
i. Hearsay may be substantial evidence where opposing party chooses not to
subpoena or confront, but administrative findings cannot be based solely on
hearsay evidence.
8. Burden of Proof
a. Standard—Burden of proof is equal to burden of persuasion and requires the claimant to
show actual proof by preponderance of the evidence.
b. Exceptions – Sometimes the ordinary standard of proof is not strict enough.
i. Deportation Cases: Clear and Unequivocal (convincing) Evidence that the
alleged grounds for deportation are true in order to enter an order for deportation.
ii. Social Security Disability Cases: Claimant has the burden of going forward, but
the ultimate burden of proof is on the agency. Claimant is entitled to benefits
when demonstrating probative evidence of disability and the agency has not
persuaded to the contrary.
9. Exclusiveness of the Record
a. APA §556(3)—the transcript of testimony and exhibits, together with all papers and
requests filed in the proceeding, constitutes the exclusive record for decision.
i. When formal adjudication is required, the agency MUST limit its consideration to
evidence on the record. However, this does not necessarily mean that a
stenographic transcript of the hearing must be prepared.
b. ALJ’s Observations—the conclusions of a case must only be reached by evidence on
record. An ALJ cannot act as a witness in a case he is hearing. See Banegas v. Heckler
10. Official Notice
a. Tribunal can rely upon rulemaking to determine issues that need not be determined
case-by-case. (Heckler)

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11. Decision Process (Post-APA)

a. Administrative Procedure Act: The APA requires the presiding officer to issue a
decisional report unless the agency requires that the record be certified to it. When the
ALJ renders a decision, it becomes that of the agency unless appealed. Usually the ALJ
must recommend a decision, and it becomes a part of the record. Parties may then file
exceptions thereto prior to the ultimate decision. APA §557(b)(c).
i. First thing’s first – presiding officer is allowed to recommend a decision.
1. Presider  Head of the Agency  Court
b. Appeal of ALJ’s Initial Decision: The APA gives the agency all of the powers that it
would have had in rendering the initial decision. APA §557(b). Hence, it is by no means
prohibited from reversing the ALJ’s conclusion, even if such overruling is largely based
upon the demeanor of key witnesses.
c. Clearly Erroneous Rule Inapplicable to Agency Appeals—An agency may overrule
the hearing examiner’s decision when the decision is largely based on the credibility of
the evidence.
i. An agency must come up with some standard to apply, but it doesn’t have to be
clear error (FCC v. Allentown)
d. Court Cannot Consider New Evidence During Judicial Review—The appeals council
has discretion to review ALJ decisions denying benefits. If the council does not agree to
review the decision, the ALJ decision becomes final and judicially reviewable. If the
council does review the decision, the council’s decision, based on all the evidence before
it, becomes the final decision that is judicially reviewable. Plaintiff may not submit new
evidence; this goes to EXCLUSIVENESS of the record; get the document on the record so
it can be used when appealing. Eads v. Secretary of Health and Human Services
12. Decisions and Findings
a. APA §557(c) – Findings and Reasons Requirement:
i. For formal adjudication, the APA requires that an agency decision –
1. Provide a statement of “findings and conclusions, and
2. The reasons or basis therefore, on all the material issues.”
ii. The findings requirement does the following –
1. Ensures that judicial review can be performed,
a. NOTE: The most cited reason for the §557(c) requirement that
findings and conclusions be set forth in an agency proceeding is
so there can be EFFECTIVE judicial review.
2. Inhibits imprudent agency decision-making,
3. Provides an explanation to the affected parties of the agency decision and
its rationale, and
4. Provides guidance to those similarly situated.
b. Full Explanation Required—an administrative decision may NOT be upheld by the
courts if the agency does not fully explain its decision.
i. An agency deciding a contested case must demonstrate that its findings lead to a
conclusion that is reasonable. See De St. Germain.
_____________________________________________________________________________________
JUDICIAL REVIEW
1. Introduction
a. The essential purpose of judicial review is to serve as a check on the abuse of power or
discretion by administrative agencies.
b. Two essential issues must be raised when a case seeks judicial review
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1. To answer this question, the reviewing judge should first look to the
governing legislation. Three additional sub-questions must be
answered…
a. Is Judicial Review SPECIFICALLY PROVIDED for? If yes,
review must be given.
b. Is Judicial Review SPECIFICALLY DENIED in the state? If
yes, review is not available UNLESS the claim is that –
i. There is a constitutional issue; OR
ii. The agency acted illegally, unconstitutionally; OR
iii. The agency acted in excess of its jurisdiction.
c. Is the statute or legislative authority SILENT on the issue of
judicial review? If yes, there is a presumption that review is
allowed, and the agency must make a clear showing that review
should not be available.
i. Note: There is no presumption that review is precluded.
ii. What is the scope of review?
1. If the statute states what the judicial process is (within the statute), that is
the ONLY judicial process you get and you MUST follow it.
2. Where a statute provides procedures for judicial review, a court must
follow those procedures. The court has no options in such a situation.
a. Statutory review procedures must be followed exactly in any
proceeding. This means the review action must be brought –
i. In the court (place) specified by statute;
ii. Within the time specified in the statute;
iii. In the form specified in the statute.
2. Statutory Silence
a. Non-Statutory Review—Even where the legislature has not explicitly provided for
judicial review (which it usually does), the absence of statutory authority for review has
usually not been interpreted by the courts as constituting preclusion of review.
b. Presumption of Availability of Judicial Review—Statutory silence DOES NOT
preclude judicial review. When personal rights are created by statute, silence as to
judicial review is not to be construed as a denial of judicial relief, particularly when the
matter is of a type typically resolved in the courts. See Stark v. Wickard
i. Purpose of Case—Final agency action is presumed reviewable under §702.
ii. Judicial review of a final agency action by an aggrieved person will not be cut off
unless there is persuasive reason to believe that such was the purpose of
Congress.
3. Statutory Preclusion
a. Narrow Construction—Preclusion statutes are narrowly construed as a general rule.
b. APA §702—“A person suffering a legal wrong because of agency action, or adversely
affected or aggrieved by agency action within the meaning of the relevant statute, is
entitled to judicial review thereof.” APA §§701 and 706 allow any person adversely
affected by an agency action to obtain judicial review, so long as the challenged action is
a final action.
i. Presumption—There is always a presumption for judicial review because it is
favorable, but if the statute precludes it, then the decision is not reviewable.
c. Exceptions
i. §701(a) limits application of the entire APA to situations in which…
1. Judicial review is precluded by statute (an intent by Congress to prohibit
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a. CLEAR AND CONVINCING TEST—There has to be clear and

convincing evidence of Congress’ intent to preclude judicial
review.
2. The agency action is committed to agency discretion by law (so that
there is no law or standard for a court to apply).
d. Example—Discretionary Termination NOT Reviewable Under APA—In Webster v.
Doe, the court held that since the director of CIA had broad and ultimate discretion
concerning employees, judicial review was precluded by APA §702(a)(2).
i. The Act allows defendant to terminate an employee whenever defendant “shall
deem such termination necessary or advisable.” This standard clearly defers to
defendant, and forecloses the application of any meaningful judicial standard of
review.
ii. Note though, under the above case, “the APA contemplates, in the absence of a
clear expression of contrary congressional intent, that judicial review will be
available for colorable constitutional claims.” Thus, there may be other causes of
action for constitutional or other equitable remedies
4. APA and Review of Discretion
a. §701—The APA allows judicial review except to the extent statutes preclude review, or
the agency’s determination is committed to its discretion by law.
i. If an agency has discretion to enforce/prosecute, then they also have discretion to
NOT enforce/prosecute. Agency decision not to take action is not reviewable
unless Congress has specifically indicated otherwise.
b. §706(2)(A)—Preclusion of review is limited to those situations where agency action is
reasonable rather than arbitrary. Thus, although an agency action may be committed to
its discretion by law, review is permitted where the agency abuses its discretion.
c. Rebuttable Presumption for Inaction—the refusal to take enforcement action is
typically unsuitable for judicial review. The presumption may be rebutted where the
substantive statute has provided guidelines for the agency to follow in exercising its
enforcement powers.
i. The §701(a)(2) exception is a narrow one, intended to apply only when statutes
are written in such broad terms that courts have no standards by which to judge
the agency’s exercise of discretion. This interpretation is consistent with
§706(2)(A), which permits judicial review and to reverse agency action for
ABUSE OF DISCRETION.
ii. Where the statute does not provide for judicial review or define any meaningful
standards to review, discretion action committed to discretion (exception 2).
1. If no judicially manageable review scheme is established in the statute,
the discretion is committed to agency exercise.
iii. Deference to agency expertise and resources appropriate and “no law to apply.”
iv. STANDARD—highly deferential and extremely limited—arbitrary and
capricious/abuse of discretion/not in accordance with law.
5. Standing
a. Justiciability—Article III of the United States Constitution limits judicial power to the
resolution of cases and controversies. This is the source of the standing requirement.
i. Basic Requirements/Elements—These requirements tend to assure that an actual
case or controversy exists, and that the court will not be adjudicating some
abstract issue. The dispute must be presented in an adversary context and in a
form capable of judicial resolution. One who seeks judicial review must allege…
1. That he has suffered some actual or threatened injury as a result of the
challenged action of the defendant (“injury in fact” referring to an
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2. That the injury is fairly traceable to the defendant’s actions (causal

connection between the injury and the conduct complained of); and,
3. That it is likely (not speculative) to be remedied by a favorable decision.
ii. Nature of Interests—The concept of standing has been expanded in recent years
to include adjudication of injury to a multitude of interests beyond those
normally recognized at common law, including economic, aesthetic, and
recreational interests.
b. APA §702 – Who has the right to be heard when dealing with judicial review of an
agency decision? A following person is entitled to judicial review –
i. Suffered a legal wrong because of an agency OR
ii. Who is adversely affected or aggrieved by final agency action.
c. Burden of Proof—Standing must be proved by the claimant; must clearly allege facts to
support that they have standing.
d. Zone of Interest Test (See Bennett v. Spear)
i. To be protected by a statute, the proper inquiry is simply “whether the interest
sought to be protected by the complainant is arguably within the zone of interests
to be protected by the statute.”
ii. Hence in applying the “zone of interests” test, we do not ask whether, in enacting
the statutory provision at issue, Congress specifically intended to benefit the
plaintiff.
iii. Instead, we first discern the interests arguably to be protected by the statutory
provision at issue. We then inquire whether the plaintiff’s interests affected by
the agency action in question are among them.
6. Primary Jurisdiction
a. Relationship to Exhaustion—Primary jurisdiction is closely related to the doctrine of
exhaustion. Each involves the issue of whether further agency proceedings are required
prior to judicial review.
b. Exhaustion—Exhaustion applies whenever the dispute is first cognizable solely in an
administrative agency. The courts will defer action until the agency has concluded its
proceedings.
c. Primary Jurisdiction—Primary jurisdiction involves a dispute that, although
originally/initially cognizable in the judiciary, requires resolution of certain issues within
the special competence of an administrative agency. Here, judicial review is deferred
until these issues have been first resolved by the agency.
i. What does this mean: Primary jurisdiction determines whether a given issue
should be passed on first by a court or an agency; i.e. whether a court or the
agency has initial jurisdiction.
1. If there is purely a legal issue, courts can have jurisdiction; if you have a
legal issue and factual issues within the expertise of the agency, the
agency will have primary jurisdiction.
ii. Advantages: The advantages of the application of the primary jurisdiction
doctrine are –
1. Agency Expertise—The agency has been entrusted by the legislative
branch to regulate a particular industry or area of public concern and has
developed some expertise in the regulated affairs and application of the
governing statute. The insights gained through agency experience and
specialization may be useful in resolving complex issues of law or fact.
2. Uniformity—Allowing administrative agency and opportunity to decide
all major issues surrounding the substance of its jurisdiction encourages
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the law. These are objectives the legislature probably desired when it
established the agency.
iii. Disadvantages: Referring questions to administrative agencies that the courts
must ultimately review may only consume unnecessary time and money, and lead
to less efficient and less economical decision-making.
d. Discretionary Refusal to Exercise Jurisdiction—Even if there is no statute requiring
exhaustion of administrative remedies, the courts can use their discretion under the
primary jurisdiction doctrine to decline to hear a suit until administrative remedies have
been exhausted. See Farmers Insurance Exchange v. Superior Court.
7. Exhaustion of Administrative Remedies
a. Definition: No one is entitled to judicial review (relief) for a supposed injury or
threatened injury until the prescribed administrative remedy has been exhausted. Stated
differently, a party may ordinarily NOT seek judicial review of administrative agency
action until she has first utilized all her appellate opportunities within the agency, i.e.
exhausted all administrative remedies.
i. If a statute or regulation says you must exhaust your administrative remedies,
then you must exhaust your administrative remedies FIRST.
b. Rationale—Several policy considerations should inform a court’s decision whether to
impose a judicial exhaustion requirement in a given case –
i. Avoidance of Premature Adjudication: Like a trial court, the agency has been
established to apply the statute in the first instance. It is usually desirable to
allow the agency the first opportunity to develop the facts and apply the law.
ii. Administrative Efficiency: It is ordinarily more efficient to allow the agency to
proceed without interruption than to allow judicial review at the various
intermediate steps.
iii. Improved Review: allowing the agency to develop a factual record and to apply
its expertise enhances judicial review. The judiciary can more efficiently deploy
its resources by reviewing the agency record rather than compiling its own
independent findings of fact.
iv. Judicial Efficiency: A party who is forced to exhaust her administrative remedies
may choose not to appeal an adverse judgment. Judicial interference in the
administrative process would also weaken the agencies by encouraging parties to
ignore those procedures.
c. Exceptions to the Exhaustion Rule—If the statute is silent about exhausting
administrative remedies, exhaustion may be avoided where . . .
i. Delay unduly prejudices judicial remedy;
ii. Substantial doubt exists about whether the remedy is available at agency (clear
futility of exhausting administrative remedies);
1. In order to prevail on a claim of futility, the plaintiff must show more
than that she doubts that an appeal would result in a different decision;
she must show that it is certain that her claim will be denied on appeal
(i.e., must be anchored in demonstrable reality). See Portela-Gonzales v.
Secretary of the Navy.
iii. A clear and objectively verifiable administrative taint exists.
d. APA §704, Actions Reviewable (codification of Exhaustion Rule)—Except as
otherwise expressly required by statute, agency action otherwise final is final for the
purposes of this section whether or not there has been presented or determined an
application for a declaratory order, for any form of reconsideration, or, unless the agency
otherwise requires by rule and provides that the action meanwhile is inoperative, for an
appeal to superior agency authority.

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i. Federal courts do not have the authority to require a plaintiff to exhaust

administrative remedies before seeking judicial review under the APA WHERE
neither the relevant statute nor agency rules specifically mandate exhaustion as a
prerequisite to judicial review.
1. If the statute or regulation says you must exhaust administrative
remedies, then you must before seeking out judicial review.
e. Exhaustion of Remedies Not a Statutory Required Prerequisite—The APA allows for
immediate judicial review if the law or agency does not require exhaustion of
administrative remedies; you can go straight to court after an ALJ decision unless the
statute states otherwise. See Darby v. Cisneros.
i. Only mandatory steps need to be taken under 704 to be deemed to be exhaustion.
You don’t need to take non-mandatory steps.
1. APA §10(c) provides that judicial review is available for final agency
action, and that an agency action is final regardless of whether
reconsideration has been sought unless the agency otherwise requires by
rule. Courts are not free to impose an additional requirement of
exhaustion when the action has become final under §10(c).
ii. The courts may still exercise primary jurisdiction.
f. Exhaustion of some claims but not others—The Supreme Court held that when a court
is presented with a suit with both exhausted and unexhausted claims, a court can let the
exhausted claims proceed rather than dismissing the entire suit. See Jones v. Bock.
8. Ripeness for Review
a. Ripeness—When one seeks discretionary relief from the judiciary of an agency action,
the courts may resist review until the controversy is “ripe.” This avoids premature
adjudication of disputes that have not reached sufficient concreteness to warrant judicial
interference, and avoids disruption of agency decision-making until the impact thereof
has run its course.
i. Order of Analysis
1. Primary Jurisdiction
2. Exhaustion of Remedies
3. Ripeness for Review
b. Test for Ripeness—The court must consider two factors in determining whether an
administrative decision is ripe for review. See Abbott Laboratories v. Gardner.
i. Fitness for Judicial Review
1. Look at final agency action/decision (no need for further factual
development); and,
2. Primarily legal matter (questions presented are of law)
ii. Hardship to the Parties
1. A party must show that withholding judicial review would result in direct
and immediate hardship and would entail more than possible financial
loss.
c. Standard for Ripeness—Under the ripeness doctrine, an agency must have taken “final”
action before judicial review is appropriate. “It is the imposition of an obligation or the
fixing of a legal relationship that is the indicium of finality of the administrative
process.” Indicia of finality include…
i. The administrative action challenged should be a definitive statement of an
agency’s position;
ii. The action should have a direct and immediate effect on the day-to-day business
of the complaining parties;
iii. The action should have the status of law;
iv. Immediate compliance with the terms should be expected; and

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v. The question should be a legal one.

9. Tort Suits as Review Actions
a. Federal Tort Claims Act of 1946—The Federal Tort Claims Act provides for specific
waiver of the defense of sovereign immunity for certain circumstances or agencies,
specified torts, and discretionary acts by government employees. But there is generally
no governmental liability for intentional torts.
i. Before the Federal Tort Claims Act of 1946, tort actions could not be brought
against the United States. The Act constitutes a congressional waiver of
sovereign immunity to the extent provided in the statute.
1. Key Provision: The U.S. shall be liable, respecting tort claims, in the
same manner and to the same extent as a private individual under like
circumstances.
ii. Exceptions to the Tort Claims Act – Where United States IS Liable for a Tort
1. Exemptions for specific functions or agencies, as well as for all claims
arising in foreign countries;
2. Exceptions for specific torts, providing that there is to be no liability of
the United States for most intentional torts; the courts are denied
jurisdiction over “any claims arising out of assault, battery, false
imprisonment, false arrest, malicious prosecution, abuse of process, libel,
slander, misrepresentation, deceit, or interference with contract rights;”
and
a. HUGE NOTE: Since the 1974 amendment, the U.S. is NOW
liable for the first six of these torts when committed by law
enforcement officers.
3. A broad exception for acts or omissions of federal officers exercising due
care in carrying out statutes or regulations, whether or not they are valid,
and performance of discretionary functions by government employees,
whether or not the discretion is abused.
a. An agency’s actions, including participating in management of a
regulated business, are exempt from liability under the FTCA
“discretionary function” exception. See United States v.
Gaubert.
10. Scope of Review
a. Review under APA § 706 (Scope of Review)—The reviewing court shall –
i. Compel agency action unlawfully withheld or unreasonably delayed; and
ii. Hold unlawful and set aside agency actions, findings, and conclusions found to
be:
1. Arbitrary, capricious, an abuse of discretion, or otherwise not in
accordance w/ law;
2. Contrary to constitutional right, power, or immunity;
3. In excess of statutory jx, authority, or limitations, or short of statutory
right;
4. Without observance of procedure required by law;
5. Unsupported by substantial evidence in a case subject to section 556
and 557 of this title or otherwise reviewed on the record of an agency
hearing provided by statute; or
6. Unwarranted by the facts to the extent that the facts are subject to trial de
novo by the reviewing ct.
iii. The court shall review the whole record or those parts of it cited by a party, and
due account shall be taken of the rule of prejudicial error.

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b. Substantial Evidence—The rule provides that substantial evidence is more than a mere
scintilla. It is such relevant evidence as a reasonable mind might accept as adequate to
support a conclusion; it really just means some reasonable basis. See Universal Camera
Corp. v. NLRB.
i. As has been discussed, formal rulemaking and formal adjudication subject to
APA §§556 and 557 are subject to the substantial evidence test. APA
§706(2)(E).
c. Arbitrary and Capricious (informal rulemaking under §553 only)
i. Scope of Review Without a Record—Ask whether the decision was based on
consideration of all the factors and was there a clear error in judgment. See
Citizens to Preserve Overton Park v. Volpe.
1. Essentially, there has to be something unexplainable about the agency’s
decision, whether it be the failure to explain the contrary evidence or the
consideration of improper facts, etc.
a. NOTE—Apply substantial evidence if it is rulemaking and you
have a record of review.
2. Generally, an agency decision will be considered arbitrary and capricious
if the agency had relied on factors which Congress had not intended it to
consider, entirely failed to consider an important aspect of the problem,
offered an explanation for its decision that runs counter to evidence
before the agency or is so implausible that it could not be ascribed to be a
difference in view or the product of agency expertise.
d. Agency Delay APA §706—The reviewing court shall (1) compel agency action
unlawfully withheld or unreasonably delayed…
i. A court MAY NOT impose deadlines for agency action when it determines the
delays are caused by inefficiency. See Heckler v. Day.
e. Doctrine of Statutory Deference—deference to an agency’s interpretation of its
enabling statute.
i. The Chevron Rule—if a statute is unambiguous the statute governs; if, however,
Congress’ silence or ambiguity has left a gap for the agency to fill, courts must
defer to the agency’s interpretation so long as it is a permissible/reasonable
construction of the statute.
1. Deference applies only when an agency has been delegated authority to
make rules having the force and effect of law (and its regulation/
promulgated rule carries the force and effect of law). It will not be given
for interpretive rules, opinion letters, memorandums, etc. See US v.
Mead.
a. For informal agency action, use Skidmore deference.
f. Doctrine of Regulatory Deference—deference to an agency’s interpretation of its own
regulations.
i. When an instructive interpretive memorandum presents a reasonable
interpretation of the regulatory regime or the regulatory scheme, a court will
defer to the interpretation unless it is “plainly erroneous or inconsistent with the
regulation[s].” See Coeur Alaska.

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PROPERTY I OUTLINE
Professor David Finnegan, Michaelmas Term 2009

RIGHT OF OWNERS (RIGHT TO INCLUDE, RIGHT TO EXCLUDE):

Property is a relationship among people that entitles so-called owners to include (permit) or exclude
(deny) use or possession of the owned property by other people.
1. RIGHT TO EXCLUDE: generally, the essence of private property is the right of the owner to
exclude others—the right to exclusive possession.
a. Limitations: Landowner may exclude others for any purpose that does not invade the
rights of another person (see State v. Shack).
i. Other Limitations: local ordinance regulations, environmental concerns, etc.
_____________________________________________________________________________________

ACQUISITION OF PROPERTY:
FIRST POSSESSION: the most fundamental rule for determining ownership is that the first person to
take possession of a thing owns it (rule of capture); “First in time, first in right”
1. Acquisition by Capture: Under the general rule, whoever is prior in time wins, i.e., the first to
capture resources is entitled to them.
a. Wild Animals (Ferae Naturae): One must (1) manifest unequivocal intent to appropriate,
(2) deprive animal of its liberty, (3) reduce it within your certain control. Pursuit is
insufficient (see Pierson v. Post).
i. Constructive Possession: despite first in time possession, courts rule in favor of
the landowner for possession, rationale soli; i.e., the land was owned “first”, not
the person hunting animal (second).
ii. Wounded or Trapped Animals: if a wild animal has been mortally wounded or
trapped so that capture is practically certain, it is treated as captured. Generally,
a captor must acquire physical control over the animal absent a custom to the
contrary (see Ghen v. Rich).

SUBSEQUENT POSSESSION: (second in time, shaped by first in time doctrine?)

1. Acquisition by Find: an owner of property does not lose title by losing the property. The
owner’s rights persist even though the article has been lost or mislaid (see Ganter v. Kapiloff).
As a general rule, a finder has rights superior to everyone but the true owner. TITLE IS
RELATIVE.
a. Lost Property: the finder of any article that has been lost has right to that article, except
to the true owner.
i. Owner Locus in Quo (place of cause of action): A man possesses everything
attached to or under his land. He does not necessarily possess a thing lying
unattached on the surface of his land (see Hannah v. Peel).
1. Status of Locus in Quo: Reasonable Expectation of Control: public
place  no expectation, private place  maybe expectation, requires
actual/constructive possession rationale soli.
2. Status of Found Item: embedded/affixed, lost/misplaced  matters only
for private property maintained as public place.
3. Status of Finder: was finder an agent/employee of someone else, or a
trespasser.
4. Awareness of object not required when attached or under the property of
the landowner (see Elwes v. Brigg Gas Co.).
b. Mislaid Property: Property is “mislaid” when voluntarily relinquished by and from the
person’s possession but accidentally left behind. Mislaid property is the possession of the
owner of the locus in quo, except to the true owner (see McAcvoy v. Medina).

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c. Abandoned Property: the finder obtains both possession and title if he exercises control
over the property with intent to assert ownership.
d. Other Terms:
i. Action of Replevin (chattel)/Action of Ejectment (real): return goods/land
ii. Action of Trover (chattel)/Action for Trespass (real): money damages
2. Acquisition by Adverse Possession: If the landowner does not bring an action of ejectment
within the statutory period, owner is barred from bringing the action. The doctrine rewards
productive use of land. Adverse possessor has the burden of proof to show all requirements have
been met, while the owner just needs to show that one is not satisfied.
a. REQUIREMENTS
i. Actual Entry: there must be actual entry, where the possessor uses the land as the
owner would (depends on the type of land)
1. Constructive Adverse Possession (UNDER COLOR OF TITLE): if
entry is only on part of the land, under defective written document,
possession extends to all the land in document when requirements met.
ii. Exclusive Possession: possessor cannot share possession with the owner or
anyone else, except as would be natural for the use of land.
iii. Open and Notorious Possession: the possessor must occupy the property in an
open, notorious, and visible manner so as to give reasonable notice to the owner
that the possessor is claiming dominion adverse to the owner’s rights (true owner
should know if making an inspection of land).
1. Minor (Boundary) Encroachment: no presumption of knowledge, actual
knowledge required of true owner for open/notorious possession of
minor encroachment (see Mannillo v. Gorski).
iv. Adverse/Hostile and Under a Claim of Right/Title: occupying the land without
the consent/permission of the true owner.
1. Under Mistake of Claim of Title: as long as the above elements are met,
there is sufficient support for a claim of title by adverse possession.
2. Tests for Hostility: DISCUSS ALL FOR EXAM PURPOSES
a. Objective Test: Possessor’s state of mind is irrelevant, as long as
possessor uses the land as the owner would without permission
(MAJORITY RULE)
b. Good Faith Test (Subjective): Possessor has a mistaken but a
“good-faith” belief that he has title to the land.
c. Aggressive Trespass Test: Possessor acts with the
purpose/intention of taking title with the knowledge that the
property belongs to another.
v. Continuous, Uninterrupted Possession: continuous when it is made without a
break in the essential attitude of mind.
1. Seasonal Use: a person can be in continuous possession when taking
possession only during a particular season, if seasonal possession is how
the average owner would use the property (see Howard v. Kunto).
2. Tacking: an adverse possessor can tack onto his own period of
possession to any period of adverse possession by predecessors in
interest, provided there is privity of estate between possessors.
a. Privity of Estate: a possessor voluntarily (free from duress)
transferred to subsequent possessor either an estate in land or
physical possession, doesn’t require contract.
b. ADDITIONAL CONCEPTS OF ADVERSE POSSESSION
i. Disabilities: if the true owner is under a disability at the time of an adverse
entry, the statue of limitations is tolled (extended) until the disability ends.

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However, only the initial disability at the time of entry tolls the statute; a
different disability arising after entry does not count.
1. Examples of Disability: a minor, mental incapacity, imprisonment
2. Typical Statute: the owner or his successor in interest has (21) years to
bring an action or (10) years after the removal of the disability
(whichever period is longer).
ii. Adverse Possession Against the Government: under common law rules, adverse
possession does not run against the government–local, state, or federal.
iii. Adverse Possession of Chattels: the requirements of adverse possession of
chattels are the same as land, expect the statute of limitations is shorter.
However, AP of land is open and notorious, while AP of chattels seldom is.
1. Discovery Rule (Due Diligence Rule): statute of limitations does not
begin to run on the owner of stolen goods as long as the owner continues
to use due diligence in looking for them. The cause of action accrues
when the owner first knows, or reasonably should know through the
exercise of due diligence, when the goods were dispossessed (see
O’Keeffe v. Snyder).
a. Burden to Prove Due Diligence Rests on the Owner.
2. New York Rule: the statute of limitations for replevin does not begin to
run until the owner makes a demand from purchaser, and the purchaser
refuses.
3. Acquisition of Chattel By Theft: title is void ab initio, cannot transfer
title to good faith buyer if chattel was stolen (buyer’s only hope of
winning is to rely on adverse possession).
4. Acquisition of Chattel by Fraud: the person acquires possession of
chattel from another by fraud, that person has voidable title. That person
can sell the chattel to a good faith purchaser, where the buyer now has a
good title (no need for a claim of adverse possession); gift of chattel only
transfers voidable title.
3. Acquisition by Gift: a gift is the voluntary transfer of property without consideration.
i. Donatio Causa Mortis: gift made in contemplation of immediately approaching
death. The requirements for a gift are strictly enforced in gifts causa mortis
(because donor could have executed a will instead)
1. The gift is revoked if the donor recovers from the illness that prompts the
gift.
2. Redelivery required when donee is already in possession of gift
ii. Donatio Inter Vivos: gift made during the donor’s life under no threat of
impending death. Once made, gift is irrevocable (unlike a will, where one can
change their mind)
1. Gift inter vivos of a future/remainder interest puts limits on the rights of
the owner in possessory/life estate (see “waste” below)
b. ELEMENTS: INTENT/DELIVERY/ACCEPTANCE
i. Donative Intent: the donor must intend to pass title presently, and not merely to
transfer possession. Doesn’t need to be express, inferred from acts and
circumstances. (Practically speaking, the more unequivocal of intent, the more
relaxed courts are on the other elements).
1. Gift by Promise: a promise to give property in the future is NOT a gift.
A gratuitous promise is not enforceable for the lack of consideration.
ii. Delivery: requires some act giving up dominion and passing control to the
donee.

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1. Actual Manual Delivery: typically, when the gift is easily moveable and
capable of manual delivery, no exceptions.
2. Constructive Delivery: the handing over of the means of obtaining
possession and control (e.g. a key), or in some other way relinquishing
dominion and control. This is permitted when actual manual delivery is
impossible or impracticable (due to size or weight) (Ex. Key to a
lockbox, password to account).
3. Symbolic Delivery: the handing over of some object that represents the
thing given (e.g. instrument in writing). This is permitted when actual
manual delivery is impossible or impracticable (Also applicable for gifts
of future/remainder interests).
iii. Acceptance: the donee must accept the gift, but where the gift is of intrinsic
value (beneficial) to the donee, acceptance is presumed.
c. CANNOT give up real property on an ORAL disclaimer (Statute of Frauds)
_____________________________________________________________________________________

THE SYSTEM OF ESTATES

POSSESSORY ESTATES
1. FOUR TYPES OF ESTATES
a. The Fee Simple: this estate has the potential of enduring forever.
i. FEE SIMPLE ABSOLUTE: a fee simple absolute is the highest form of
ownership. It is of potentially infinite duration with no limitations on its
inheritability, and it cannot be divested or end on the happening of any event
(see White v. Brown).
1. Creation: at Common Law, a fee simple was created by deed only by
using the magic words, “to A, and his heirs.” If these words were
omitted, the grantee took only a life estate. Heirs are NOT conveyed
anything.
a. “…and his heirs”  words of limitation indicating that A takes a
fee simple.
b. Under Modern Law, the requirement was abolished by most
states. Either a deed or will is presumed to pass the largest estate
the grantor or testator owns.
2. Transferability: the Statue Quia Emptores (1290) established the basic
tent that land is freely alienable. The Statute of Wills (1540) granted fee
simple owners the right to sell or gift the land to whomever they want.
3. Freely Inheritable: fee simple owners have the right to devise their land
or have it descend to their heirs where the owner dies intestate (no will).
a. Heirs: persons inheriting an intestate’s real property
i. LIST OF HEIRS
1. Issue (descendants): children
2. Ancestors: Parents
3. Collaterals: Siblings, Aunts/Uncles/Cousins
4. Escheat: to the state where asset is located.
b. Devisees: persons inheriting decedent’s real property.
i. In a will, real property is devised
c. Next of Kin: persons inheriting intestate’s personal property
d. Legatees: person inherits decedent’s personal property
i. In a will, personal property is bequeathed
4. Restraints On Alienation: restraints generally are deemed void.

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a. Disabling Restraint: withholds from the grantee the power of

transferring his interest (involved in White v. Brown)
b. Forfeiture Restraint: provides that if the grantee attempts to
transfer his interest, it is forfeited to another person
c. Promissory Restraint: provides that the grantee promises not to
transfer his interest
5. Absent Clear and Unambiguous Intent  Court presume fee simple
absolute, and not life estate
ii. DEFEASIBLE FEES: a fee simple can be created that is defeasible upon the
happening of some event. Defeasible fee simple estates have the potential,
though not the certainty, of infinite duration. These three limitations are
applicable to all possessory interests (one can have a life estate determinable, a
term of years subject to condition subsequent, or even a fee tail subject to
executory limitation).
1. Fee Simple Determinable: this estate ends automatically when some
specified event happens.
a. Creation: by language that connotes that the fee is to last only
until a stated event occurs (e.g. “so long as,” “until”). Words of
temporal limitation must be used: expressions of motive or
purpose are inadequate.
b. Transferability: may be transferred or inherited but remains
subject to the limitation.
c. Correlative Future Interest—Possibility of Reverter: the grantor
has a future interest called a possibility of reverter which may be
expressly retained (by words in a deed or will) or may arise by
operation of law.
d. Example: O conveys land “to A so long as the land is used for
school purposes” (see Mahrenholz Case)
2. Fee Simple Subject to Condition Subsequent: this estate does not
automatically end, but ends after the condition occurs and the grantor
elects to re-enter and terminate the estate.
a. Creation: created by giving grantee a fee simple and then
providing that it may be cut short if a condition happens (it is
NOT automatic, like in the case of FS Determinable).
i. Look for language “but if”
b. Transferability: may be transferred or inherited until the
transferor can and does exercise the right of entry.
c. Correlative Future Interest—Right of Entry: the grantor has a
future interest called a right of entry; grantor must exercise right
to terminate use of land by A.
d. Example: O conveys land “to A, but if A ceases to use land for
school purposes...”
3. Fee Simple Subject to Executory Limitation: this is a fee simple that,
upon the happening of an event, is automatically divested by an
executory interest in a third person.
a. Example: “to School, but if it ceases to use land for school
purposes, then to Hospital.”
b. The Fee Tail: a fee tail estate also has the potential to endure forever, but ends if and
when the first fee tail tenant has no lineal descendants to succeed him in possession.
Magic Words  O conveys “to A and the heirs of his/her body”

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i. Created by the Statute de Donis Conditionalibus (1285), with the purpose to keep
the land within the family for succeeding generations.
ii. Nature of Estates: the estate endures as long as descendants of the original
grantee are alive, and is inheritable only by the grantee’s descendants.
iii. When Fee Tail Ends: accompanied by future interest, either Reversion of grantor
or Remainder in some other grantee.
iv. Modern Law: all but 4 states in US have abolished the fee tail. Those that do
have it, courts construe it as a fee simple, fee simple absolute, or fee simple
subject to conditions if no children.
c. The Life Estate: This estate will end at the death of a person/life tenant. Any language
that O intends to convey to A for length of A’s life.
i. Alienability of Life Estate: a life tenant can transfer whatever estate he has.
1. Duration: A can only convey a life estate to someone else per autre
vie—thus, B has right to possess so long as A is alive; if A dies, reverts
to O.
ii. Waste: Relevant whenever two or more persons have rights to possess property at
the same time (concurrently) or consecutively. The central idea is that A should
not be able to use the property in a manner that unreasonably interferes with the
expectations of B.
1. Affirmative (Voluntary) Waste: liability from injurious acts that have
more than trivial effects. This occurs when the life tenant destroys
property or exploits the natural resources.
a. Injurious: substantially reduces the value of the property
b. EXCEPTION
i. The life tenant can alter or demolish a structure,
provided the value of the remainder is not diminished by
these actions.
2. Permissive (Involuntary) Waste: Arising from the failure to act
(question of negligence).
iii. Future Interest (at End of Life Estate): Reversion or Remainder, law presumes
reversion if O does not specify any remainder interest.
iv. TRUST: most life estates are created in chattel, NOT land, primarily in cash.
Create a trust, life estate in you, with remainder future interest in heirs.
d. Terms of Years: limited duration
i. Leasehold Estate (nonfreehold estate): estate of limited duration; ends on a fixed
calendar date. Ex. O conveys to A for 5 years. O conveys to A for 1 week.
ii. Future Interest: Reversion to landlord, or remainder future right to possess to
someone else.

FUTURE INTERESTS
1. INTERESTS RETAINED BY THE TRANSFEROR (common law rule  future interest may NOT
be transferred by will or by inter vivos conveyance, see Mahrenholz case. Majority Rule—
possibility of reverter/right of entry ARE transferable inter vivos.)
a. Reversion: the interest remaining in the grantor, or in the successor in interest of a
testator, who transfers a vested estate of a lesser quantum than that of the vested estate
he has (LE, FT, TofY). Once reversion is created, it is transferable inter vivos.
i. Example, Guaranteed to Become Possessory: O conveys land “to A for life”; at
A’s death, O or O’s successor in interest will be entitled to possession.
ii. Example, Possession NOT Certain: O conveys land “to A for life, then to B if B
survives A.” If B dies before A, reversion to O. If A dies before B, reversion to
O TERMINATES.

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b. Possibility of Reverter: an interest remaining in the transferor or his heirs when a fee
simple determinable is created.
c. Right of Entry (Power of Termination): a right of entry arises in a grantor when he
creates an estate subject to condition subsequent and retains the power to cut short the
estate
2. INTERESTS CREATED IN THE TRANSFEREE
a. Remainder: an interest created in a grantee that is capable of becoming a present
possessory interest estate upon the natural expiration of a prior estate.
i. Vested Remainder: a remainder is vested if Two –Prong Test met…
1. It is given to an ascertained person (by name), AND
2. It is NOT subject to a condition precedent (pres-SEE-dint). O conveys
land “to A for life, then to B in fee simple/fee tail/TofY” creates a vested
remainder in B.
a. Indefeasibly Vested: the remainder is certain of becoming
possessory in the future and cannot be divested (permanently
retain the estate)
i. Example: “to A for life, then to B and her heirs”; B or
B’s successor in interest is certain to take possession
upon A’s death.
b. Vested Subject to Open: O  “to A for life, then to A’s kids.”
Kids interest is CR/FSA (O, reversion). If A has child X
(ascertainable = VR/FSA/SO), reversion terminates, but subject
to open b/c remainder is in a “class” which X belongs, but more
may belong in the future. When A dies, no member can be
added to class.
c. Vested Subject to Complete Divestment: “to A for life, then to
B, but if B does not survive A, then to C.”
i. B’s interest is VR/FSA/SCD. C does NOT have a
remainder, but a vesting executory interest in FSA.
ii. Steadfast Rule: if the first interest is a vested remainder,
the next future interest is an executory interest.
3. When the remainder is vested, the reversion in O terminates,
transferability of vested remainder does not change the label when
conveyed.
ii. Contingent Remainder: a remainder is contingent if (1) it is given to an
unascertained person, OR (2) it is made contingent upon some event occurring
other than the natural termination of the preceding estates.
1. Presently Unascertained Person: a person not yet born or one who cannot
be determined until the happening of an event.
a. Example: “to A for life, then to the heirs of B”; the remainder is
contingent because the heirs of B cannot be ascertained until B
dies.
2. Condition Precedent: an express condition set forth in the instrument
which must happen before the remainder becomes possessory (part of the
clause granting the remainder)
a. Example: O conveys land “to A for life, then to B if B survives
A, then to C.” B’s interest is a CR/FS. C’s interest is CR/FS
i. Steadfast Rule: If the first interest is a contingent
remainder in fee simple, then the second interest is also a
contingent remainder.

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b. Example, NOT Condition: “to A for life, and in the event of A’s
death, then to B and his heirs”; the natural termination of a
preceding estate is not a condition.
b. Executory Interests: an executory interest is a future interest in a transferee that must,
in order to become possessory end artificially (future interest, only possessory by
artificially divesting or cutting short an interest),
1. Divest or cut short some interest in another transferee if a certain event
occurs (this is known as a shifting executory interest), OR
a. Example: O conveys land “To A and his heirs, but if B
graduates from Law School, then to B and his heirs.” FSA in A
does not have a natural termination point, B interest only
possessory by divesting the interest of A (A’s interest is FS
subject to EL).
2. Divest the transferor in the future (this is known as a springing
executory interest)
i. Modern Executory Interest: fee simple subject to an executory limitation. Type
of future interest that only becomes possessory by cutting short a prior interest
that does not terminate naturally.
a. Example: O conveys “to A and his heirs, but if A dies w/o issue, then to
B.”
i. A has a FSA subject to EL (A’s interest will not terminate
naturally). If condition occurs (A’s death w/o issue), right to
possess is artificially cut short. B’s interest is an EI/FS
b. Example: O conveys “to A for life, then to B and her heirs, but if B dies
under the age of 21, to C and her heirs.”
i. B’s interest is VR/FS/SCD. C’s interest is EI/FSA.
c. LOOK AT EXAMPLES IN NOTES FOR MORE.
ii. Trust: a trust is a fiduciary relationship in which one person (the trustee) holds
legal title to property (res) subject to equitable rights in beneficiaries. It is
basically a device whereby one person manages property for the benefit of
others. A person who creates the trust is the settlor.
a. Settlor takes asset and contributes it to a trust. Take title to asset and
split it apart into (1) legal title, and (2) equitable title.
i. Equitable Title (future interests held by beneficiaries, “to A for
life, then to A’s kids)
ii. Legal Title (held by trustee in FSA, owes duties to beneficiaries
in management of the asset.)

Rules Furthering MARKETABILITY by DESTROYING CONTINGENT FUTURE INTERESTS

1. Destructibility of Contingent Remainders: a remainder in land is destroyed if it does not vest
at or before the termination of the preceding freehold estate.
a. Example: O conveys “to A for life, then to B and her heirs if B performs in a Broadway
play.” If at A’s death B has not performed, B’s remainder is destroyed. O now has the
right of possession.
i. [A = LE, B = CR/FS, O = Reversion]
b. Expressly ABOLISHED in MOST jurisdictions, why? People like O’s intentions are
frustrated with the rule, they vote, representatives abolish rule.
c. If abolished, at T2 A dies and B not performs, B does not have the right to possess, O
retains the right to possess  O = FS/EL, B = EI/FS.
2. The Rule in Shelley’s Case: it provides that if the four below are met…then the remainder
becomes a remainder in fee simple (or fee tail) in A.

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1. One instrument
2. Creates a life estate in land in A, and
3. Purports to create a remainder in persons described as A’s heirs (or heirs of A’s
body), and
4. The life estate and remainder are both legal or both equitable
a. Example: O conveys “to A for life, then to A’s heirs.” The Rule in Shelley’s Case gives
A a vested remainder in fee simple. A’s life estate then merges into the remainder,
leaving A with a fee simple in possession. The land is immediately alienable by A and
not tied up for A’s lifetime.
3. Doctrine of Worthier Title
a. Example: O conveys “to A for life, then to O’s heirs.” In the absence of the Worthier
Title Doctrine, there is a contingent remainder in favor of O’s unascertained heirs. Under
the Worthier Title Doctrine, however, no such remainder exists. Rather, O has a
reversion.
4. The Rule Against Perpetuities (RAP): is a rule that strikes down contingent interest that might
vest too remotely.
a. COMMON LAW RULE: no interest is good unless it must vest, if at all, not later than 21
years after some life in being (a “validating life”) at the creation of the interest. Rule of
Logical Proof  must vest during lifetime of Lives in Being, or 21 years after the death
of the last person in the Lives in Being.
i. Interest: Applies to Contingent Remainders, Executory Interests, Vested
Remainders Subject to Open (“Class Gifts”). Does not apply to any present
possessory estate, or future interests in the grantor (reversion, etc.).
ii. Vesting:
1. Contingent Future Interests condition precedent is satisfied.
a. By Will: time starts when testator dies.
b. By Deed: times starts at time of conveyance
2. Executory Interest: when the holder obtains right to possess.
3. Class Gifts: When the class closes, certain no additional member will be
added to the class
iii. Validating Life: Any person who can affect the vesting of the interest and who is
alive at the creation of the interest can be a validating life, provided that the
claimant can prove the interest will vest or fail within 21 years of the person’s
death.
1. A child is a being from the time of conception, if later born alive.
2. Usual Suspects: those identified as part of the conveyance
iv. FIVE-STEP APPROACH TO RAP
1. Identify the interests that are created
2. Vest? When in time will that contingent future interest vest (what
event)
3. Identify the Lives in Being (which of the LIB can affect vest)
4. Produce a child
5. Kill ALL the Lives in Being
a. Example: O conveys “to A for life, then to A’s first child to
reach 21.” A is the validating life. You can prove that any child
of A will reach 21 within 21 years of A’s death [the remainder
must vest or terminate within this period remainder is valid]
i. A = LE, 1st Kid = CR/FS, O = Reversion
ii. Event that must occur is, first child of A must turn 21.
iii. Lives in Being  A and O. Which can affect the
vesting? A

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iv. Make A have a kid X

v. Killing A and O to create T2, to start the 21-year-clock.
X will reach 21 years of age in time period.
b. NON-Example: O transfers “to A for life, then to A’s first child
to reach 25.” There is no validating life. You cannot prove that
A’s first child will reach 25 within the 21 years after A’s death.
(Assume A has kid B who is 24)
i. A = LE, 1st Kid = CR/FS, O = Reversion
ii. Event? Child of A must be the first to reach 25
iii. LIB  O, A, and B
iv. A has kid X
v. O, A, and B are killed off.
6. IF CONDITION PRECEDENT MUST VEST UNDER A NAMED LIFE
IN BEING, INTEREST IS GOOD.
a. Example: O  A for life, then to B if B attains the age of 30.
Must vest in B’s lifetime.
7. Class Gift Example: O  A for life, then to A’s kids who reach 25. A
has kid, B, who is 26. B = VR/FS/SO. Vesting when the class closes
(certain no member will add, A dies and all of A’s kids either reach 25 or
die before 25).
a. A has kid X. Kill O, A, and B. X will not reach 25 in 21 years to
close the class for vesting.
b. Commercial Transactions: no natural lives in being between corporations, for the 21
period starts at the time of transaction.
i. Options: RAP applies
ii. Preemptive Right (Right of First Refusal): RAP does NOT apply
c. STATUTORY RAP BELOW WILL NOT BE ON EXAM
i. Development
1. “Wait-and-See” Doctrine: interests are judged by actual events, not by
possible events (i.e., wait to see if things play out within the rule)
2. Cy Pres: this rule allows courts to rewrite/reform an invalid interest,
with the Rule’s limitations, to approximate most closely the intention of
the creator of the interest.
ii. USRAP (Uniform Statutory RAP): a conveyance is good if the condition:
1. Complies with Common Law RAP
2. Actually vests or terminates within 90 years
3. (In Some States) Court can tweak the conveyance to ensure compliance
within 90 years if:
a. The grant violates Common Law RAP, AND
b. The Rule of Convenience applies

CONCURRENT ESTATES (Co-ownership and Martial Interests)

4. Tenancy in Common: separate but undivided interests in the property; the interest of each is
descendible and may be conveyed by deed or will. [Separate interest but right to possess the
whole, despite the fact that the shares may be unequal.]
a. Freely alienable, inheritable, and devisable
i. Example: O  A and B. If B dies, interest goes to B’s heirs.
b. Ambiguity in Conveyance  Courts presume Tenancy in Common
5. Joint Tenancy: like TIC, but has the right of survivorship (jus accrescendi). Under common
law, joint tenants together are regarded as a single owner; if a joint tenant dies nothing passes to

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the surviving joint tenant (if A dies, B has 100% interest in property) Interest in JT is NOT
inheritable or devisable, but ARE alienable inter vivos  severs JT into a TIC.
a. To Create a Joint Tenancy: express language “to A and B jointly (with right of
survivorship)” (careful, look at fn. 4 on pg.277)
i. Under Common Law, O could not create a joint tenant with himself and A
b. Under Common Law, Four Unities to Joint Tenancy
i. Time: the interest of each joint tenant must be acquired or vest at the same time.
ii. Title: all joint tenants must acquire title by the same instrument or by a joint
adverse possession.
iii. Interest: all must have equal undivided shares and identical interests measured
by duration
iv. Possession: each must have a right to possession of the whole. One joint tenant
can voluntarily give exclusive possession to the other joint tenant.
c. Sever Joint Tenancy: A joint tenant can unilaterally sever the joint tenancy by conveying
his interest to a third party (including himself) as a tenant in common, in order to dispose
of interest by will (devisable interest).
i. Mortgage: some jurisdictions consider it analogous to a judgment lien, not a
conveyance of interest. [A mortgage is only a lien and does not destroy the unity
of title] MAJORITY VIEW
1. Common Law, “Title Theory of Mortgages”: mortgagor transfers title to
mortgagee until the debt is repaid, at which point it transfers back to the
mortgagor
2. Does Mortgage Lien Survive When Joint Tenant Dies? NO, the other
joint tenants do not inherit the mortgage lien taken by one of the other
joint tenants. The other cotenants are not successors to the interests of
the dead cotenant (MAJORITY VIEW)
a. Burden on Mortgagee: Just have all cotenants sign the loan after
a title search, that way it can survive.
ii. Lease: functional equivalent of a lien (does not sever joint tenancy). Lease
cannot impair the rights of the other joint tenants (i.e. the right to possess). The
lessee of the land now shares the same rights to the other joint tenants (if lessee
refused entry to other joint tenant = ouster).
1. JOINT TENANT CANNOT UNITLATERALLY TERMINATE THE
LEASE
d. Joint Tenancy Bank Accounts: NOT DISCUSSED IN CLASS
i. “True Joint Tenancy”: present gift of partial sum deposited in addition to
survivorship rights to the whole sum in the account
ii. “Payable-On-Death”: make a gift only of survivorship rights
iii. “Convenience”: power to draw on the account but no survivorship rights.
6. Tenancy by the Entirety: created only between a married couple. It is like the joint tenancy in
that four unities (plus a fifth—unity of marriage) are required, and the surviving tenant has the
right of survivorship. (Abolished in many jurisdictions, ½ States)
a. Termination in Three Ways
i. Death, if Wife/Husband dies
ii. If both agree to convey away the interest (cannot unilaterally convey or mortgage
one’s interest in the TBE, see Sawada). Effectively, it is a shield against
creditors.
iii. Divorce
b. Can Federal Government Seize Interest of One Tenant?
i. Split decisions, some courts say government might have right to survivorship of
one tenant, others say no.

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7. Relations Among Concurrent Owners: (partition, ouster, accounting, contribution)

a. Partition: a right that every cotenant (in TC or JT) has  the privilege of each co-owner
to transform a concurrent estate into estates held in severalty.
i. Partition-by-Sale: court takes the title to the co-owned property, supervise an
auction, and the proceeds are divided among the cotenants depending on their %
interest (co-owners lose the right to possess). Ordered only when following two
conditions are met…
1. Physical attributes of the land render partition in kind impracticable or
inequitable, AND
a. How many co-owners are there? Many = hard to draw line.
b. Location and presence of geographic features.
2. Owners’ interest would better be promoted by a partition by sale.
a. Need to be ground in fact, not mere speculations
ii. Partition-in-Kind: physical division of the property itself (drawing a line on the
map).
b. Ouster: when one cotenant refuses entry to the property to the other cotenant, the non-
occupying tenant can bring a claim of ouster to require the other co-tenant to either
vacate the property or pay rent (NOT EJECTMENT).
i. Remedy: If there is ouster, remedy is the paying of rent to the non-occupying
cotenant; measure of rent is the fractional value of the property (establish market
value, then get % interest in property).
ii. Adverse Possession: Deny existence of cotenancy by occupying cotenant. In
AP, there is a “wrongful” possessor, doesn’t the cotenant have the right to
possess, i.e. not wrongful?
2. Fiduciary Duty: Possession only wrongful when the non-possessing
tenant has actual notice of hostile intentions/adverse claim. Notice?
Maybe if possessing tenant refuses entry to another cotenant.
c. Accounting: one cotenant unilaterally contracts with some third party, and derives
income from that agreement, non-occupying cotenant can obtain fair share from the
actual receipts.
i. Remedy: % of actual receipts
ii. Rents and Profits: a cotenant who collects from third
d. Contribution: a cotenant paying more than his shares of taxes, mortgage payments, and
other necessary carrying charges generally has a right to contribution from the other
cotenants, at least up to the amount of the value of their share in the property.
i. If the cotenant who receives greater benefits, exceeding the money paid for taxes,
no right of contribution
ii. Repairs: cotenant unilaterally repairing/paying the costs for necessary repair, NO
right to contribution for costs associated with necessary or reasonable costs of
repair. HOWEVER, cotenant does receive credit if a claim of partition arises.
iii. Improvements: no right of contribution, but even in an accounting or partition
action, not entitled to some share of the costs, BUT the cotenant may benefit for
any upswing in value (i.e. value added by the improvement, the improving
cotenant is entitled to all the appreciation and value of the partition sale)
1. Example: At T1, property = $100K, at T2 cotenant $10K improvement,
at T3 partition sale $120K…if $20K increase was attributed to the
improvement, then cotenant gets $20K.

_____________________________________________________________________________________

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TRANSFERS OF LAND:
THE CONTRACT OF THE SALE: typically includes the subject matter (specifics of land), price, method
of earnest money payment, and establishing the date for closing (contract is fully performed at closing).
During “executory” phase (seller still in possession of property) of the contract, there will be a (1)
physical inspection of the land, (2) inspection of title, (3) financing (mortgage loan).
1. The Statute of Frauds: enacted in 1677 under the title “An Act for the Prevention of Frauds and
Perjuries.” Sought to make people more secure in their property and their contracts by making
deceitful claims unenforceable.
a. First, except for leases for less than three years, no interest in land could be created or
transferred except by an instrument in writing signed by the party to be bound thereby
(i.e. the defendant; could be buyer or seller)…writing must, at the minimum, state the
price and describe the real estate [Sections 1 & 3].
b. Second, NO action shall be brought “upon any contract or sales of lands…or any interest
in or concerning them…unless the agreement upon which such action shall be brought or
some memorandum or note thereof shall be in writing, and signed by the party to be
charged therewith.” [Section 4]
c. EXCEPTION to Statute of Frauds: distinction not always clear…
i. Part Performance: allow specific performance of oral agreements when
particular acts have been performed by one of the parties to the agreement, not
expected to see unless there was a contract. [Evidentiary Question]
1. Originated in equity in suits for specific performance and in most
jurisdictions does not apply to actions at law for damages
2. What Acts Necessary/Sufficient? Buyer taking possession, paying most
or all of purchase price, and/or making substantial/valuable
improvements
ii. Estoppel: applies when unconscionable injury would result from denying
enforcement of the oral contract after one party has been induced by the other
seriously to change his position in reliance on the contract (i.e. detrimental
reliance).
2. Marketable Title = “title that is free from reasonable doubt, and a title is doubtful and
unmarketable if it exposes the party holding it to the hazard of litigation after closing (creating a
just apprehension of its validity in the mind of a reasonable, prudent and intelligent person)
“Buy title, not a lawsuit.” But parties can negotiate around quality.
a. The defect that the purchaser complains of must be of a substantial character and one
from which he may suffer injury.
b. Parties are free to negotiate over the quality of the title (no negotiations, courts presume
“marketable title” as described above).
c. “Abstract of Title”: a report summarizing title history. Examples: liens, leases, lesser
estates, outstanding mortgage lien.
i. Existence of Restrictions: Private restrictions, generally unmarketable (unless
contract around default rule). Public restrictions, marketable.
ii. Violation of Restrictions: always makes title unmarketable.
3. Equitable Conversion: if there is a specifically enforceable contract for the sale of land, equity
regards as done that which ought to be done.
a. Risk of Loss (Default Rule): courts typically place the risk of loss on the buyer; buyer
obtains equitable title interest while seller retains legal title. Expectation of legal title on
the buyer (?), absent provision allocating the risk of loss.
i. Modern View: risk of loss assigned to the party that retains possession during
executory phase (NOT the MAJORITY view for most jurisdictions).
b. Example: property burns down during executory phase (occurring between contract and
closing).

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4. The Duty to Disclose “Defects”: where a (physical) condition which has been created or known
by the seller that materially impairs the value of the contract and is peculiarly within the
knowledge of the seller or unlikely to be discovered by a reasonable, prudent purchaser
exercising due care with respect to the subject transaction, nondisclosure constitutes basis for
rescission as a matter of equity.
a. “Material”: the defect must be “material” to be actionable. [Two tests]
i. An objective test of whether a reasonable person would attach importance to it in
deciding to buy (majority view), or
ii. A subjective test of whether the defect “affects the value or desirability of the
property to the buyer.”
b. Doctrine of Caveat Emptor: strict rule of “buyer beware”
i. Tort Claims: affirmative misrepresentations, active concealment
c. Statutes: many states have enacted statutes for the seller to deliver a written statement
disclosing facts about the property to the buyer.
i. Many have anti-stigma statutes; murders, etc. on property do not need be
included in disclosure of defects
5. Merger Doctrine: at closing the contract is deemed fully performed, i.e. no longer a contract.
Any express or implied contractual warranties/conditions are terminated at closing by merger.
The buyer has no recourse for contract-like issues post-closing. [Now in disfavor in most
jurisdictions] [Default Rule, can be negotiated around]
a. Limitations:
i. Only applied to conditions/warranties that relate to title quality, does NOT affect
causes of action that relate to physical quality of the property.
1. Example: disclosure requirement; pre-closing buyer finds defect; buyer
can sue for non-disclosure on recission. Post-closing, disclosure
obligation is not terminated b/c it goes to physical quality, NOT title
quality…but, sue for damages.
6. The Implied Warranty of Quality: arises post-closing.
a. Subsequent purchasers who suffer purely economic damages from latent defects
manifested within a reasonable time may maintain an action in implied warranty without
privity, but NOT in negligence (there was no duty of care for negligence, as well as the
fact that the negligence caused purely economic damages).
i. I.e., recovery barred by contract law because of privity of contract, and barred by
tort law, because it is purely economic loss. Thus, the only recovery available is
through an action in implied warranty.
b. Limitations: (1) must be a latent defect, (2) reasonable time, not an arbitrary time frame
(may depend on the structure and its use), (3) causation (damage caused by defect), and
(4) there was a duty inherent to perform workmanlike manner and in accordance with
accepted standards.
i. Uniform Land Transaction Act: Six-year statute of limitations between the time
of the first possessor and finding the defect. Has NOT been enacted by ANY
state, but may be influential on court decisions.
7. The Deed: contains all the essential elements required in order for an instrument to be a
conveyance: grantor, grantee, words of “grant,” description of land involved, signature of the
grantor, and in some jurisdictions, attestation or acknowledgment (consideration is customary to
presume that the grantee is a bona fide purchaser, and protection against unrecorded instruments).
a. Forgery and Fraud: forged deed is void. Deed procured by fraud is voidable by the
grantor in an action against the grantee, but a subsequent bona fide purchaser from the
grantee who is unaware of the fraud prevails over the grantor.

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Three Types of Deeds:

b. General Warranty Deed: warrants title against all defects in title, whether they arose
before or after the grantor took title. Contains 6 express warranties/covenants of title
(Remedy for breach of covenant for first 5 is damages)
i. First 3 covenants = “present” covenants  breached at closing. Last 3 covenants
= “future” covenants, breached after closing under claim of paramount title.
Statute of Limitations for “present,” accrues at closing. SOL for “future,”
accrues at time of eviction.
1. Covenant of Seisin: grantor warrants that he owns the estate that he
purports to convey.
2. Covenant of Right to Convey: grantor warrants that he has the right to
convey the property (issue when dealing with trust; a trustee may be
barred from conveying title).
3. Covenant Against Encumbrances: grantor warrants that there are no
encumbrances on the property.
a. Encumbrances include…
i. Pecuniary Charge: mortgages, judgment liens, tax liens,
or assessments
ii. Estates/Interests in Land: less than fee, like leases, life
estates or dower rights.
iii. Easements/Servitudes: rights of way, restrictive
covenants and profits.
b. Latent conditions on property that are in violation of statutes or
government regulations never constitute encumbrances (unless
there is pending litigation).
i. Courts pre-closing are more liberal on what is an
encumbrance, but those same conditions post-closing
will not constitute an encumbrance.
4. Covenant of General Warranty: grantor warrants that he will defend
against lawful claims and compensate the grantee for any loss that the
grantee may sustain by assertion of superior title.
5. Covenant of Quiet Enjoyment: grantor warrants that the grantee will not
be disturbed in possession and enjoyment of the property by assertion of
superior title.
6. Covenant of Further Assurances: the grantor promises that he will
execute any other documents required to perfect the title conveyed.

a. Remedy for Breach of This Covenant – is injunction (basically

specific performance, compelling grantor to remove defect).
ii. Which Covenants Run With the Land?
1. Majority: C (remote grantee) does not have a cause of action for
covenant violation of present covenants (seisin, convey, encumbrances),
they do NOT run with the land.
a. However, future covenants “run with the land”, so that C has
cause of action for violation of future covenants.
2. Minority: where the original grantor A violates covenant of seisin (does
not actually own the land) and conveys to subsequent, remote grantees
(B, and then B to C), both B and C may sue A. C does not sue B b/c the
defect originated with A (see Rockafellor)
c. Special Warranty Deed: period of time covered by the warranties is different than
general deed. Warranties of title, scope limited against defects only during the time that

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grantor held title [Typically contains same six covenants as general warranty deed]. SEE
illustration on p.515.
d. Quitclaim Deed: contains no warranties/covenants of title of any kind. It merely
conveys whatever title the grantor has, if any, and if the grantee of a quitclaim deed takes
nothing by the deed, the grantee cannot sue the grantor.
8. Estoppel by Deed: when a grantor conveys property to grantee, but does not actually own the
property, and the grantor warrants title to the land, if the grantor subsequently acquires title to that
land, the title automatically passes to the grantee [typically does NOT extend to cases involving
quitclaim deeds unless the deed represents that the grantor had title].
9. Delivery: “an act that evinces an intent to be immediately bound by the transfer.” To be
effective, the deed must be delivered with the intent that it be presently operative. Typically an
issue concerning donative transactions.
a. Attestation of public (municipal) official creates presumption of delivery
i. But, if the deed is on its face unconditional, official cannot provide oral
testimony about any conditions of the deed.
b. If one party delivers deed to a third party (deposited into escrow) with the intention that
the deed be recorded upon their death, then the deed acts as a will and must conform to
the Statute of Wills (unless grantor has the present intent to pass title and forever part
with all lawful right and power to retake or repossess the deed).
i. Delivery Without Handing Over: if the grantor intends to pass title or future
interest to the grantee now, there has been a delivery even though possession may
be postponed until the grantor’s death.
c. Revocable Trusts: unlike a revocable deed, revocable trusts are valid in all states.
i. In equity, to create a valid trust (revocable or irrevocable), the grantor need only
manifest an intent to create a trust and, if land is involved, sign a written
instrument to satisfy the Statute of Frauds. Delivery of a declaration of trust is
not required if the grantor is the trustee.
1. A grantor can make himself a trustee, giving himself legal title, and has
retained the power of revocation. Make the grantee a beneficiary of the
trust to avoid probate.
10. Mortgages: when buyer of real property loans money, they mortgage their house as a form of
security for the lender in case the mortgagors default on payments.
a. TITLE THEORY
b. LIEN THEORY
c. Equity of Redemption: the interest the mortgagor has in the property, the right of the
borrower to pay off debt before foreclosure.
d. Statutory Right of Redemption: right of defaulting borrower even after foreclosure to
recover title, i.e. create a window of time for borrower to pay off debt to recover title.
Winning bidder from foreclosure holds title with quiet enjoyment only after period.
e. Foreclosure: when a mortgagor defaults on payments, the mortgagee can bring a sale of
foreclosure.
i. Judicial Proceedings (Traditional Approach): judicial order and judicial sale.
The price is ordinarily not challengeable (unless it shocks the conscience of the
court), and the amount realized is applied to the debt. [Why go this route?
Deficiency judgments may require judicial sale.]
ii. Deed of Trust: distinct from power of sale. Equitable principles vary. Generally
the mortgagee is empowered to conduct the sale without going to court.
iii. (Private) Power of Sale: more efficient sale exercised by the mortgagee. Courts
may scrutinize the sale more closely to assure that the mortgagee acted fairly, and
may deny deficiency judgment.

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1. Fiduciary Duties: Mortgagee Must Act with Good Faith and Due
Diligence (Commercially Reasonable Duty)
a. Bad Faith: there must be an intentional disregard of duty or a
purpose to injure
b. Due Diligence: whether a reasonable person in the [lender’s]
place would have adjourned the sale, or taken other measures to
receive a fair price [Protect the mortgagors equity]
2. Damages
a. Bad Faith: Fair Market Value – Foreclosure Sale Price
b. Due Diligence: Fair Price – Foreclosure Sale Price
c. Fair Market Value > Fair Price
iv. ADDITIONAL NOTES:
1. Multiple Mortgages: “First in time, first in right.” When a mortgagor
has multiple mortgages, the foreclosure auction proceeds go to the first
mortgagee, remainder (if there is any) goes to the second mortgagee.
f. Deficiency Judgment: when the property is sold, if the sale price is less than what is
owed, the mortgagee may recover a judgment of deficiency to satisfy the debt of the
mortgagor.
i. Antideficiency Statutes: many states have enacted legislation designed to protect
some borrowers from deficiency judgments. [Common form—asset used to get
loan is the residence, by statute, mortgagees unable to bring deficiency
judgment?]
g. Equity: Fair Market Value – Mortgage Debt = Equity
h. Land Sale Contract (Contract for Deed): Mortgage Substitute—buyer pays-off purchase
price over time in installments (principle + interest), where buyer has right to possess
now, and continue to possess while making payments, and the seller holds onto legal title
until debt settled (see also in Waldorf)
i. After specified default period, seller can terminate contract. Hold onto title and
the land. However, when the buyer has made substantial improvements to the
land, such that he has acquired an equitable interest in the land, the seller must
go to court and bring an action of foreclosure, i.e. treat buyer as mortgagor and
the seller as the mortgagee (Property Law trumps Contract Law). Remaining
debt paid to seller at foreclosure, and remainder from sale price goes to the buyer
1. Does not apply to cases where the buyer has not made substantial
payments, or where the buyer absconds from the property

TITLE ASSURANCE:
1. The Recording System: established a system of public recordation of land titles, and preserved
in a secured place important documents that, in private hands, may be easily lost or misplaced.
The recording acts generally do not affect the validity of a deed or other instrument.
a. Common Law—first in time, first in right, unless a person can qualify for protection
under the applicable recording act. Has been modified by recording statutes in vastly
every jurisdiction.
b. Bona Fide Purchaser for Value (BPV)—to be a BPV, must meet the following two…
i. Subsequent grantee must be a purchaser; parts with good and valuable
consideration in exchange for land (i.e. not donees, devisees, heirs). Amount of
consideration must be more than nominal.
ii. Bona Fide—take title without notice of prior conveyance [see notes below on
notice]
iii. IF B is not a Bona Fide Purchaser  common law rule applies

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2. Types of Recording Acts: Under the recording acts, a subsequent bona fide purchaser for value
is protected against prior unrecorded interests.
a. Race Statute—as between successive purchasers of the same land, the person who wins
the race to record prevails [Notice is irrelevant]
i. Ex. 1—O  A, but A does not record. Then O subsequently  B for a valuable
consideration. B knows of the deed to A. B records his deed from O to B. B
prevails over A, and B owns the land.
b. Notice Statute—if the subsequent purchaser had notice of a prior unrecorded instrument,
the purchaser could NOT prevail over the prior grantee [i.e. recording of deed by A puts
B on notice of conveyance] About ½ States adopt Notice Statutes
i. Ex. 2—Assume facts in Ex. 1, but B has no knowledge of A’s deed, B prevails
over A even if B does not record the deed from O to B.
ii. Shelter Rule—a person who takes from a bona fide purchaser protected by the
recording act has the same rights as his grantor.
1. Ex. 3—Assume facts in Ex. 2, A now records his deed. Thereafter C
wants to purchase from B. C, searching title, would find A’s deed on
record, and from facts off the record finds out that B had no notice of A’s
deed. If B had no notice, B prevails over A, and C can buy from B, and
thus prevail over A.
a. If C does not record, and A then conveys to D, D prevails over
C. However, if C records deed before conveyance to D, puts D
on notice, C prevails.
c. Race-Notice Statute—(other ½ of States have adopted Race-Notice) a subsequent
purchaser is protected against prior unrecorded instruments only if the subsequent
purchaser…(First BPV to record)
i. Is without notice of prior instrument, AND
ii. Records before the prior instrument is recorded.
1. Ex. 4—O  A, no record; then O  B, BPV, no record
a. Who wins at this point? A, common law first in time
b. If A records before B, who wins? A
c. If B records before A, who wins? B
3. Acknowledgment of Recorded Deed: must be before a notary public.
4. Types of Notice:
a. Actual Notice—one is personally aware of a conflicting interest in real property, often
due to another’s possession of the property
b. Constructive Notice—two types
i. Record Notice—notice one has based on properly recorded instruments
ii. Inquiry Notice—facts that would cause a reasonable person to make inquiry into
the possible existence of an interest in real property (courts read into statutes
some inquiry notice)
1. Contents of deed or any other instrument, consider the legal implications
of any document that has been placed on the record (see Harper)
2. Actual possession always is constructive notice; such possession, when
open, visible and exclusive, will put upon inquiry those acquiring any
title to or a lien upon the land so occupied (see Waldorf).
5. Marketable Title Acts: the purpose of these acts is to limit title searches to a reasonable period
of time, typically the last 30 or 40 years. Under a marketable title act, all claimants of interests in
land, to be safe, must file a notice of claim every 30 to 40 years after the recording of their
instruments of acquisition. [Acts do not require a person seeking their benefits to be a bona fide
purchaser for value].
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ACQUISITION BY CREATION
GENERAL PRINCIPLES OF INTELLECTUAL PROPERTY:
• Competition depends on imitation
• As a result, the quality of the machines may rise and their prices fall
o Competition encourages innovation
Common Law: general rule—in absence of some recognized right at common law, or under the statutes,
a man’s property is limited to the chattels that embody his invention. Others may imitate these at their
pleasure (see Cheney Brothers Case)
• Supreme Court created a sort of common law patent or copyright for reasons of justice in regard
to news between competitors (see INS. V. AP).
o Not extended to dress patterns (see Cheney Brothers Case)
Legislation: the absence of property rights can dampen production, but recognition of them can create
costly monopoly power. Difficult trade-offs have to be made, and—with regard to property in ideas and
information in particular—they are made, in the main, by Congress through legislation. [Federal statutes
typically cover patent and copyrights, while trademarks are subject to overlapping protection]
1. Patents—are granted for novel, useful, and nonobvious processes or products. Once issued,
patents last for a period of 20 years from the date of the application. Patent are not renewable,
and when they expire, the process or product enters the public domain
2. Copyrights—protect the expression of ideas (not the ideas themselves) in books and articles,
music, artistic work, and so on. Protection begins once the work in question is set down in a
tangible medium, and it last for a long time (in the ordinary case, 70 years after death of creator).
Like patents, copyrights must be novel.
3. Trademarks—words and symbols indicating the source of a product or service; owners of marks
are protected against use of similar marks by others when such use would result in confusion.
They are lost when abandoned (and also when the mark becomes generic, like with aspirin).
4. Protection of Trade Secrets—still province of state law.
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PROPERTY II OUTLINE
Professor David Finnegan, Hilary Term 2010

LEASEHOLDS: THE LAW OF LANDLORD AND TENANT

THE LEASEHOLD (NON-FREEHOLD) ESTATES
1. The Term of Years: an estate that lasts for some fixed period of time or for a period computable
by a formula that results in fixing calendar dates for beginning and ending, once the term is
created or becomes possessory.
a. A term must be for a fixed and definite period, but it can be terminable earlier upon the
happening of some event or condition
b. Because a term of years states from the outset when it will terminate, no notice of
termination is necessary to bring the estate to an end.
c. A unilateral power to terminate a lease can be engrafted on a term of years, as well as a
periodic tenancy.
i. Example: “L  T for 10 years or until L sooner terminates.” This creates a term
of years determinable. [Future Interest = Reversion in L, same for all leases]
d. The death of the landlord or tenant has no effect on the duration of a term of years.
2. The Periodic Tenancy: a lease for a period of some fixed duration that continues for succeeding
periods until either the landlord or tenant gives notice of termination.
a. Example 1: “to A from month to month.”
b. Example 2: Annual rate made payable on a monthly basis = periodic tenancy
c. If notice is NOT given, the period is automatically extended for another period.
i. Under common law, half a year’s notice is required to terminate a year-to-year
tenancy. For any periodic tenancy of less than a year, notice must be given equal
to the length of the period, but not to exceed 6 months.
1. Effective Notice—common law, notice must be given for the tenancy to
end on the last day of the period.
a. Example: On Nov. 16th, T notifies L that T would vacate Nov.
30th. T must pay for all of Nov rent and Dec rent.
d. The death of the landlord or tenant has no effect on the duration of a periodic tenancy.
3. The Tenancy at Will: a tenancy of no fixed period that endures so long as both the landlord and
tenant desire. If the lease provides that one party can terminate it, it is necessarily at the will of
the other as well if a tenancy at will has been created (common law rule adopted by Lord Coke).
a. The tenancy at will ends when one of the parties terminates it
b. Modern statutes ordinarily require a period of notice—30 days or a time equal to the
interval between rent payments—in order for one party or the other to terminate.
i. Common Law: no notice required
c. Death of landlord or tenant terminates the tenancy at will
d. Unilateral Termination
i. Common Law: Unilateral termination of lease creates tenancy at will, allowing
the other party to terminate the lease.
ii. Modern Approach: Unilateral termination of lease may create a determinable
life estate. A “lease will terminate, at the latest, upon the death of the named
lessee. The fact that it may be terminated at some earlier point, if the named
tenant decides to quit the premises, does not render it indeterminate” (see Garner
v. Gerrish). L would have reversion (death), and possibility of revertor (no pay).
1. Example 1: “L  T for as long as T desires to stay on the land.” This
lease creates a determinable life estate in T, terminable at T’s will or on
his death (see Restatement, Property 2d, Landlord Tenant §1.6).
2. Example 2: “L  T for as many years as L desires” L = PoR, T = FSD

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iii. Myers v. East Ohio Gas Co., leases that clearly and unambiguously terminate at
the will of only one party are to be controlled by their express terms. But
ambiguous leases (those which do not clearly state whether they are terminable at
the will of one or both parties) are subject to a rebuttable presumption that they
are at the will of both
e. Conveyances: T’s conveyance of possessory interest with sublease/assignment
terminates tenancy at will. L’s conveyance of reversion, terminates tenancy at will.
4. The Tenancy at Sufferance: Holdovers: arises when a tenant remains in possession (holds
over) after termination of the tenancy.
a. Common law gives the landlord essentially two options—eviction (plus damages), or
consent (express or implied) to the creation of a new tenancy.
i. When a tenant continues in possession after the termination of his lease, the
landlord can evict him, treat him as a trespasser, or hold him as a tenant.
1. “Once a landlord elects to treat a tenant as a trespasser and refuses to
extend the lease on a month-to-month basis, but fails to pursue his
remedy of ejecting the tenant, and accepts monthly checks of rent due, he
in effect agrees to an extension of the lease on a month-to-month basis”
(see Crechale & Polles, Inc. v. Smith).
b. In most jurisdictions, holding over gives rise to a periodic tenancy (in the other
jurisdictions, it results in a term). The periodic tenancy is measured by the way rent is
computed, up to a maximum period of one year (see Restatement, Property 2d.).
i. Courts dislike lengthy terms/periods for holdovers (in favor of the tenant)
THE LEASE: Leases give rise to the landlord-tenant relationship, which carries with it certain
incidents—certain rights and duties and liabilities and remedies—that do not attach to other relationships.
1. Conveyance v. Contract: a lease transfers a possessory interest in land, so it is a conveyance
that creates property rights. But it is also the case that leases usually contain a number of
promises—such as a promise by the tenant to pay rent or a promise by the landlord to provide
utilities—so the lease is a contract, too, thus creating contract rights.
a. Though leaseholds eventually came to be recognized as interests in land, they were and
still are classified, like contractual interests, as personal property (“chattels real”).
b. Key Distinguishing Feature: Conveyance of right to possess…
i. Intention of the parties
ii. The number of restrictions
iii. Exclusivity of possession
iv. Degree of control retained by the granting party
v. Presence or absence of incidental services
2. The Statute of Frauds: commonly, the American statutes provide that lease for more than one
year must be in writing. All but a few jurisdictions permit oral leases for a term of one year or
less than a year; those that do not usually hold that entry under an oral lease plus payment of rent
creates a periodic tenancy that is not subject to the Statute.
a. Independent Statute of Frauds enacted in almost all jurisdictions for Leases
3. Bargaining Power: a lease contemplates a continuing relationship between landlord and tenant.
Landlords typically use form leases—standardized documents offered to all tenants on a take-it-
or-leave-it basis, with no negotiation over terms. Competition among landlords result in standard
terms, limiting any unequal bargaining power.
a. The underlying problem is not form leases by monopoly power (where the buyer has no
good alternatives and is thus put in a position compelling the buyer to agree to terms with
the seller that would be bettered in a competitive market).

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UNLAWFUL DISCRIMINATION/SELECTION OF TENANTS (See Attached Copy from Book)

1. Fair Housing Act, 42 U.S.C.A. §§3601-3619, 3631 (1968): landlords unable to discriminate
against potential tenants based on race, color, religion, sex, handicap, familial status, or national
origin. [NOT included  marital status and sexual orientation (maybe included by States) or
current drug addicts (but recovering addicts are handicapped)]
a. Only applies to residential property (not commercial or personal).
b. Applies to buying/selling/leasing/restrictive covenants/municipality zoning.
c. Deals with discrimination in the provision of services and facilities, as well as
advertising.
d. Standard of Proof: A discriminatory motive/intent need not be proved in order to make
out a prima facie case under FHA; proof of discriminatory effect is sufficient.
i. After P establishes either disparate impact or disparate treatment, D must survive
strict scrutiny analysis (compelling governmental interest, no lesser
discriminatory alternative), OR
ii. In the case of private defendants, discrimination taken pursuant to a rational and
necessary business purpose
1. If D demonstrates a valid justification, the burden in private sector shifts
back to P to demonstrate that the business necessity was a pretext for
engaging in discrimination.
e. There are EXEMPTIONS to §3604 (except for advertising)
i. §3603(b)(1)—
ii. §3603(b)(2)—nothing in 3604 shall apply to rooms containing living quarters if
the owner maintains or occupies one of such living quarters in the residence
2. 14th Amendment, US Constitution: prohibits only state (not private) action that discriminates
based on race.
a. Shelley v. Kraemer (1948), the Supreme Court held that state courts could not enforce
racially restrictive land use agreements entered into by neighbors (i.e. courts enforcement
of private discrimination equals “state action”, and is thus subject to 14th Amendment
review). [See also notes on the enforceability of covenants to gain greater insight]
3. Civil Rights Act of 1866, 42 U.S.C.A. §1982: “All citizens of the United States shall have the
same right, in every State and Territory, as is enjoyed by white citizens thereof to inherit,
purchase, lease, sell, hold, and convey real and personal property.”
a. Reaches racial discrimination, as well as national origin (see Shaare Tefila Congregation
v. Cobb (1987)).
b. Residential and Commercial and Personal property
c. Limited just to the explicitly listed forms of conduct
i. I.e. does not apply to advertising
d. NO EXEMPTIONS for §1982
DELIVERY OF POSSESSION
1. English (Majority) Rule—there is in every lease an implied covenant on the part of the landlord
that the premises shall be open to entry by the tenant at the time fixed by the lease for the
beginning of the term.
a. Remedy: 1. Terminate lease and sue for damages, 2. (If 3rd party in partial possession)
take possession of remainder with abatement in rent and damages, 3. (Delayed entry) not
obligated to pay rent for the term during which he was kept out…or sue third-party.
i. Does not extend to the period beyond the day when the lessee’s term begins (if
after that day a stranger trespasses, the remedy is against the stranger and not the
landlord).

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2. American (Minority) Rule—the landlord is not bound to put the tenant into actual possession,
but is bound only to put him in legal possession, so that no obstacle in the form of superior right
of possession will be interposed to prevent the tenant from obtaining actual possession of the
demised premises (unless the landlord has expressly contracted such a covenant).
a. Remedy: against the wrongdoer/third party and not against the landlord.
SUBLEASES AND ASSIGNMENTS: original tenant on the hook for rent absent express release from
the landlord for either of these subsequent transfers of possession (privity of contract)
1. Distinction (Ambiguity)
a. Formalistic Approach/Common Law
i. An assignment arises when the lessee transfers his entire interest under the
lease—when, that is, he transfers the right to possession for the remaining
duration of the term. Privity of estate2 now between landlord and new tenant.
1. Right of reentry in the instrument of transfer does not make it a sublease
(majority of jurisdictions)
ii. A sublease arises when the lessee transfers anything less than his entire interest.
Privity of estate remains with the original tenant and the landlord [original tenant
retains right of reversion]
1. Ex. If two years remain on the lease and the lessee transfers for a term of
one year.
2. Assumption of Loss (Release): sub-tenant assumes duties/responsibilities
of the original lease  L and T1 now have privity of contract
b. Modern (Extreme Minority) Rule: ascertain the intention of the parties. Actual words
used are not conclusive but they may be persuasive (see Ernst v. Conditt).
c. Examples:
i. L  T sublet to T1, back rent. L sues T under POK and POE
ii. L  T assigns to T1, back rent. L sues T under POK, sues T1 under POE
d. Privity of Estate: a possessor voluntarily (free from duress) transferred to subsequent
possessor either an estate in land or physical possession, doesn’t require contract.
[Relationship where landlord creates leasehold estate and transfer the estate to the tenant
 handing over the right to possess and the tenant takes possession  privity of estate
now exists]
i. A mutual or successive relationship to the same right in property, as between
grantor and grantee or landlord and tenant
1. Landlord can get rent from anyone with whom the landlord is in privity
of estate
2. Consent to Assign/Sublet (Commercial Only)
a. Common Law/Majority Rule: the lessor may arbitrarily refuse to approve a proposed
assignee no matter how suitable the assignee appears to be and no matter how
unreasonable the lessor’s objections absent an explicit reasonableness clause.
b. Modern View/Minority Rule: consent may be withheld only where the lessor has a
commercially reasonable objection to the assignment, even in the absence of a provision
in the lease stating that consent to assignment will not be unreasonably withheld.
i. What is Reasonable? Financial responsibility of proposed assignee, suitability of
the use for the particular property, legality of the proposed use, need for
alteration of the premises, and nature of the occupancy (i.e. office, factory, clinic)

2
Privity of Estate: a possessor voluntarily (free from duress) transferred to subsequent possessor either an estate in land or
physical possession, doesn’t require contract. [Relationship where landlord creates leasehold estate and transfer the estate to the
tenant  handing over the right to possess and the tenant takes possession  privity of estate now exists] A mutual or
successive relationship to the same right in property, as between grantor and grantee or landlord and tenant

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ii. What is Unreasonable? Denying consent solely on the basis of personal taste,
convenience or sensibility, or in order for the landlord to charge a higher rent
than originally contracted for.
THE TENANT WHO DEFAULTS
1. The Tenant Breaches but Retains Possession (Reclaiming Property)
a. Common Law: a landlord may rightfully use self-help to retake leased premises from a
tenant in possession without incurring liability for wrongful eviction provided two
conditions are met;
i. The landlord is legally entitled to possession (e.g. holdover tenant, tenant
breaches a lease containing a reentry clause, AND
ii. The landlord’s means of reentry are peaceable.
b. Modern View: judicial proceedings, including the summary proceedings provided in
those states’ unlawful detainer statutes, are the exclusive remedy by which a landlord
may remove a tenant claiming possession.
i. “The only lawful means to dispossess a tenant adversely to a landlord’s claim of
breach of a written lease is by resort to the judicial process” (see Berg v. Wiley).
2. The Tenant Who Has Abandoned Possession: abandonment of the leased property by the
tenant occurs when he vacates the leased property without justification and without any present
intention of returning and he defaults in the payment of rent.
a. Common Law—(based on principles of property law) a landlord is under no duty to
mitigate damages caused by a defaulting tenant
i. Remedies: the landlord may…
1. Terminate lease
2. Obtain another tenant while holding original tenant liable for deficiency
in rent
3. Permitting the premises to remain vacant while collecting the agreed-
upon rent from the original tenant
b. Modern (Majority) Rule—(based on principles of contract law) a landlord has an
obligation to make a reasonable effort to mitigate damages when the tenant has
abandoned the property before seeking a remedy.
i. Standard: burden on the landlord (minority view) to show that he used
reasonable diligence in attempting to re-let the premises
1. Factors in Considering Reasonable Diligence—whether the landlord,
personally or though an agency, offered or showed the apartment to any
prospective tenant, or advertised it in local newspapers
a. In mitigating damages, the landlord need not accept less than fair
market value or “substantially alter his obligation as established
in the pre-existing lease.”
ii. Failure to Mitigate: (variation) in some jurisdictions the landlord is not entitled
to any back rent after the time of abandonment, in others landlord can recover the
difference between original rent and a lower rent.
3. Surrender of the Premises
a. Surrender terminates a lease, provided that the landlord accepts the tenant’s offer.
i. Express Offer and Express Acceptance—the lease is unambiguously terminated.
ii. Implied Offer and Implied Acceptance—generally turns on the intent of the
landlord in retaking possession, without regard to whether the tenant is on notice
that any reletting is on the tenant’s account.
1. Under the intent test, one considers whether the landlord’s actions are
inconsistent with or repugnant to continuation of the original lease.

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4. Landlord’s Remedies and Security Devices

a. Rent and Damages—the landlord’s right to sue for back rent and for damages
occasioned by the tenant’s breach of lease obligations are straightforward. If the tenant is
in possession, the landlord may also terminate the lease and recover possession.
i. Doctrine of Anticipatory Breach: if the landlord terminates because of a breach
of the lease, he may recover—in addition to back rent and other damages—the
present value “of amount by which the unpaid rent for the balance of the
term…exceeds the amount of such rental loss that the lessee proves could be
reasonably avoided.”
b. Security Devices
i. Security Deposit: in principle, the landlord is obliged to return to the tenant,
upon termination of the lease, the deposit less any amounts necessary to
compensate for defaults by the tenant.
ii. Other Techniques: Consideration, bonus, advance rent, liquidated damages, rent
acceleration.
DUTIES, RIGHTS, AND REMEDIES (Especially regarding the condition of the leased premises)
1. Landlord’s Duties; Tenant’s Rights and Remedies
a. Quiet Enjoyment and Constructive Eviction
i. Covenant of Quiet Enjoyment—ordinarily a covenant of quiet enjoyment is
implied in a lease (breached by either actual or constructive eviction)
ii. Doctrine of Constructive Eviction—any act or omission of the landlord or of
anyone who acts under authority or legal right from the landlord, or of someone
having superior title to that of the landlord, which renders the premises
substantially unsuitable for the purpose for which they are leased, or which
seriously interferes with the beneficial enjoyment of the premises, is a breach of
quiet enjoyment and constitutes a constructive eviction of the tenant.
1. Examples: failure to supply heat, main waste pipe clogged with sewage,
building used for lewd purposes.
2. The tenant’s right to claim a constructive eviction will be lost if he
does not vacate the premises within a reasonable time after the right
comes into existence
iii. Partial Eviction—when there is actual eviction, even though from a part of the
premises only, the tenant is relieved of all liability for rent notwithstanding
continued occupation of the balance.
1. Not applicable for partial, constructive eviction
iv. Tenant’s Remedies—significant interference (but not constructive eviction) 
breach of covenant; the tenant can stay in possession and sue for damages equal
to the difference between the value of the property with and without the breach
1. Substantial Breach: tenant may leave under theory of constructive
eviction, the tenant is relieved of any liability for future rent and entitled
to recover damages—to compensate both for the losses realized while in
possession and for losses resulting from a higher rent for equivalent
replacement premises.
b. The Illegal Lease—a lease that was an illegal contract made in violation of statutory
prohibitions and therefore unenforceable (tenant justified in not paying rent and
remaining in possession of the premises).
c. The Implied Warranty of Habitability—Residential Property
i. Doctrine of Caveat Lessee: under common law, the tenant took possession of the
demised premises irrespective of their state of disrepair. The landlord was under

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no duty to render the premises habitable unless there was an express covenant in
the written lease.
1. Common Law Exceptions: duty to disclose latent defect, maintain
common areas, abate nuisances, undertake carefully any repairs
ii. Modern View: an implied warranty exists in the lease, whether oral or written,
that the landlord will deliver over and maintain, throughout the period of the
tenancy, premises that are safe, clean, and fit for human habitation (covering all
latent and patent defects in the essential facilities of the residential unit).
1. Tenant must show that the landlord (1) had notice of the previously
unknown defect and failed, within a reasonable time, to repair it,
and (2) the defect, affecting habitability, existed during the time for
which rent was withheld.
2. Breach of Warranty—first look to any relevant local or municipal
housing code and violations of those codes (minor violations not a
breach). Then inquire whether the claimed defect has an impact on the
safety or health of the tenant.
a. In most jurisdictions, a tenant cannot waive warranty of
habitability either by express provision in the lease or implied by
the surrounding circumstances
iii. Measuring Damages: difference between the value of the dwelling as warranted
and the value of the dwelling as it exists in its defective condition + damages for
discomfort and annoyance arising from the landlord’s breach.
1. Punitive Damages:
d. Retaliatory Eviction—most jurisdictions today forbid retaliatory action by landlords
renting residential space.
2. Tenant’s Duties; Landlord’s Rights and Remedies
a. Affirmative Waste—duty breached if a tenant makes “such a change as to affect a vital
and substantial portion of the premises; as would change its characteristic appearance; the
fundamental purpose of the erection; or the uses contemplated, or a change of such a
nature, as would affect the very realty itself, extraordinary in scope and effect, or unusual
in expenditure.
b. Duty to Repair (Permissive Waste)—tenant has an implied duty to make minor repairs.
The duty was to make such repairs as would keep the building windtight and watertight,
thus preserving the property in substantially the same condition as at the commencement
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_____________________________________________________________________________________
LAND USE CONTROLS
PRIVATE LAND USE CONTROLS: THE LAW OF SERVITUDES
1. Easements—an easement is a grant of an interest in land that entitles a person to use land
possessed by another.
a. Definitions
i. Affirmative Easement—gives a neighbor the right to enter or perform an act on
the land of another (servient land).
1. DEFAULT RULE: no negative easements
ii. Negative Easement—the owner of a negative easement can prevent a servient
landowner from doing some act on the servient land. Imposes some kind of
restriction on a land-user.
iii. Easement Appurtenant—an easement attached to and benefiting a dominant
estate in the use of another tract of land and burdening a servient estate. [It can be
tied back to a particular plot of land]
1. An easement appurtenant is attached to the dominant tenement and
ordinarily passes to any subsequent owner of the tenement. If the
easement is personal, however, it will pass to subsequent owners.
2. Easements appurtenant run with the land and are therefore passed when
the property is transferred.
iv. Easement in Gross—an easement that is a personal right of its holder to a use of
another's land and that is not dependent on ownership of a dominant estate
1. In cases of ambiguity, easements appurtenant are favored over easements
in gross
2. An easement in gross CANNOT be IMPLIED.
v. Profit—a profit is the right to enter land belonging to someone else AND to take
something off another’s lands that is part or product of the land (e.g. timber). A
grant of a profit implies an easement to go onto the land and remove the subject
matter
vi. License (Contractual Right, i.e. NOT a servitude)—a license is a permission to
go on another’s land (e.g. plumber/repair). It can be written or oral and in
generally revocable at the licensor’s will unless it is coupled with an interest or
estoppel applies, and nontransferable by the licensee. B/c of confusion with
easements in gross, courts prefer licenses (see Holbrook v. Taylor).
b. Creation of Easements—an easement can be created by any of the following
i. Express Written Grant—an easement must be in writing signed by the grantor to
satisfy the Statute of Frauds. If a grantor gives oral permission to enter the land,
a license is created.
1. Exceptions—fraud, part performance, and estoppel/irrevocable license;
easements by implication or prescription; and easements lasting less than
one year.
ii. Reservation—allows a grantor’s whole interest in the property to pass to the
grantee, but revests a newly created interest in the grantor (or third party).
1. Third Party Reservation (see Willard v. First Church of Christ,
Scientist)
a. Common Law (Majority) Rule—cannot reserve an interest in
property to a stranger to the title (i.e. a third party).
b. Modern View—can reserve an interest in property in a third party
i. TEST: look to the intent of the grantor

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2. Distinguish from Exception—which prevents some part of the grantor’s

interest from passing to the grantee. The exception cannot vest an
interest in the third party, and the excepted interest remains in the grantor
iii. Estoppel (License Irrevocable): When a person has a license which includes the
right to erect structures and acquire interest in the land in the nature of an
easement by making improvements thereon, the licensor may not revoke the
license and restore his premises to their former condition after the licensee has
exercised the privilege given by the license and erected the improvements at
considerable expense (see Holbrook v. Taylor). [Reasonable and detrimental
reliance]
iv. Implication—an exception to the Statute of Frauds, an easement by implication is
created by operation of law.
1. Easement from Prior Existing Use (Quasi-Easements)—if, before a
tract of land is divided, a use exists on the servient part that is reasonably
necessary for the enjoyment of the dominant part and a court finds the
parties intended the use to continue after separation, an easement may be
implied (see Van Sandt v. Royster)
a. REQUIREMENTS:
i. Use of the easement must be reasonably necessary to
the enjoyment of the dominant estate
ii. Prior existing use (quasi-easement) must be continuous
iii. Quasi-easement must have been apparent (but not
always visible)
iv. An easement can be implied only over land granted or
reserved when the tract was divided AND only in favor
of the dominant tenement
2. Easement by Necessity—this usually involves a way of access and
involves strict necessity, not merely convenience. An easement by
necessity is implied only when a tract is divided; no prior existing use is
required. The easement terminates when the necessity ends (see Othen v.
Rosier).
a. Often only applied to LANDLOCKED property with no legal
right-of-way for ingress and egress.
v. Prescription—an easement may be created by a period of adverse use. The
majority of courts permit prescription as a matter of public policy by analogy to
the law of adverse possession.
1. ELEMENTS
a. Open and notorious use;
b. Adverse and under a claim of right; and
c. Continuous and uninterrupted (tacking is allowed)
vi. Public Prescriptive Easements—the majority of jurisdictions permit the public at
large to acquire a public easement if the public uses private land in a manner that
fulfills prescription requirements (e.g. a roadway).
1. Public Trust Doctrine (beaches)—states owns certain portions of
beachfront property in trust for the benefits of all society at the exclusion
of the “wet sand” area.
a. Upland Owner’s Rights (not absolute)
i. Right to have access to the water
ii. Right to reasonably use the water
iii. Right to accretion and reliction
iv. Right to the unobstructed view of the water

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c. Assignment
i. Easement Appurtenant—unless personal, easements appurtenant are freely
assignable and are transferred along with the transfer of the dominant tenement.
So too, the burden is transferred along with the servient land.
ii. Easement In Gross—the old rule held that benefits of easements in gross were
not assignable or inheritable. Today this rule is no longer followed in most
jurisdictions, especially with respect to commercial easements (those with
primarily economic benefits), which are assignable.
1. Commercial Easements—freely transferable
2. Noncommercial Easements—transferable ONLY if the parties so
intended.
iii. EXCEPTIONS to Assignability
1. Recreational Easements—(easements for hunting, fishing, boating, and
camping) restricting their assignability appears to rest on the courts’
conclusion that they are intended to be personal and on the fear of
burdening the servient land beyond the original contemplation of the
parties.
iv. Profits—profits have always been freely transferable.
d. Scope of Easements—Two separate issues are raised by consideration of the scope of an
easement: (1) How extensively and intensively may the easement holder use the
easement, and (2) To what degree may the servient estate owner use or interfere with the
easement?
i. Parties’ Intentions Control: The parties’ intentions control the scope of any
easement, but intentions are not always easy to identify. Other factors,
considered below, are thus used to help infer intentions.
ii. How easement was created:
1. Easement by Grant: The scope of easements by grant is governed by the
express language of the grant, to the extent that is or can dispose of the
matter.
2. Easements Implied from Prior Use: The scope of easements implied
from prior use is whatever was within the reasonable contemplation of
the parties at the time of the division.
3. Easements Implied by Necessity: The scope of an easement implied by
necessity is identical to the necessity.
4. Easements by Prescription: The scope of prescriptive easements is
generally confined to the particular use that produced the easement by
prescription.
iii. Change in location of easement: Easements with a specified location are
permanently fixed, unless both parties agree to a change; but some modifications,
within that location, may be made if they do not increase the burden on the
servient estate.
iv. Enlargement of the dominant estate: An easement, however created, cannot be
used for the benefit of land that is not part of the dominant estate. A landowner
who attempts to do so will usually be enjoined, though when the equities favor it
courts may award damages and impose a judicially created servitude on the
enlarged dominant estate to ensure that the use of the easement will not impose
an unreasonable burden on the servient estate.
v. Division of an Easement’s Benefit: The benefit of an easement may not be
divided if it will produce an unintended increase in the burden on the servient
estate.

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1. Appurtenant easement: Division of the dominant estate: The benefit of

an appurtenant estate may be divided into smaller portions so long as the
burden on the servient estate is not greater than what the parties initially
intended.
2. Easements in Gross and Profits a Prendre: If a profit or easement in
gross is shared with the servient estate it may not be divided, but if the
profit or easement in gross is exclusively held by one person it may be
divided. If it is exclusively held by several persons it may be divided but
it must be used as a single unit. This”one-stock” rule is intended to
prevent the burden on the servient estate from being materially increased
beyond the initial intent. Thus, some courts ignore the one-stock rule
and look only at the increased burden.
vi. Use or interference by servient estate owner: Unless the easement grants to the
holder a right of exclusive use the servient owner may also reasonably use the
easement. In any case, a servient estate owner may not unreasonably interfere
with the easement holder’s use of the easement.
e. Termination of Easements
i. Expiration: When the easement says it expires, it does. As noted in an express
grant’s writing.
ii. Merger: When title to the dominant estate and servient estate is acquired by one
person, the easement is extinguished.
iii. Actions of the Easements Holder: Release, abandonment, and alteration of the
dominant estate:
1. The easement holder may voluntarily release the easement.
2. An easement will be extinguished if its owner manifests a clear and
unequivocal intention to abandon the easement, but mere lack of use is
not sufficient proof of abandonment.
3. If the dominant estate owner so alters the dominant estate that the
easement may no longer be used if it is extinguished.
iv. Cessation of Purpose: Easements end when their purpose is completely
extinguished.
1. An easement implied from necessity terminates when the necessity
ceases.
2. An easement by estoppel (an irrevocable license) terminates when the
benefit of the reliance expenditure s have been fully reaped.
3. Acts of third parties that wholly destroy the easement’s purpose cause an
easement to terminate.
4. The accidental destruction of the servient estate destroys the easement,
but this rule only applies to easements in structures and not the ground
itself.
v. Actions of the servient estate holder: If the servient estate owner uses the
easement adversely to the easement holder for the prescription period the
easement is extinguished by prescription. In a few states, an easement burdening
a structure (not the land) is extinguished if the structure is intentionally destroyed
by its owner because its continued existence is not economically feasible.
2. Negative Easements
a. English Common Law  “No Negative Easement” Rule
i. Exceptions
1. Access to light
2. Access to air flow
3. Access to water (not to restrict flow of water)

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4. Structural support (lateral walls between buildings)

a. Land or artificial structure
b. American Courts more willing to recognize other exceptions to the rule
i. See Peterson Case  Scenic-View exception
ii. Solar Panels Exception (extension access to light)
iii. Conservation Easements for the benefit of some public actor
1. These are negative easements in gross
c. If negative easement does not fall within exception  Only way to be enforceable
against successors-in-title (i.e. run with the land) is if it satisfies the elements of a real
covenant or equitable servitude
3. Covenants
a. Real Covenants (Covenants Enforceable at Law)—[relief, money damages]
i. Requirements
1. Intent benefits/burdens run with the land
2. Notice
a. Common Law—no notice
b. Modern—notice needed now
3. Touch and Concern (see equitable servitude)
4. PRIVITY IS REQUIRED
a. Benefits—vertical POE required
b. Burdens—vertical POE AND horizontal POE required
5. In written instrument (no exceptions)
a. Cannot arise by estoppel, implication, or prescription
b. Equitable Servitudes (Covenants Enforceable in Equity)—a covenant respecting the
use of land enforceable against successor owners or possessors in equity regardless of its
enforceability in law [injunctive relief]
i. Requirements
1. Parties intend promise to run
a. Benefits and burdens of the covenant to run with the land
i. Look to deed of conveying document for language
2. Subsequent purchaser has actual or constructive notice of the
covenant
a. IMPORTANT ELEMENT, b/c of operation of recording statutes
3. The covenant “touch and concern”/(sufficiently relates to) the land
a. See Neponsit, for the covenant to touch and concern, it must
affect legal relations (the benefits and burdens) of the parties to
the covenant, sufficiently related to the land and owners of
particular parcels of land (not merely as members of the
community in general)
b. TEST: For the benefit of a covenant to run with the land the
covenant must touch and concern, meaning increase the use,
utility, or value of the land for the covenantee in order for it
to run with the land (“market impact”). If the benefit is only
a personal commercial benefit, meaning that it does not
touch and concern the land involved, then the covenant will
not be found to run with the land.
c. I.e. must sufficiently relate to the land somehow, not personal
benefit/burden (in gross)
i. Ex. [A]  [B] with covenant of B to do A’s taxes. If B
conveys to C, A cannot sue C for not doing A’s taxes.
1. In gross does NOT run with the land

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d. English Common Law—Affirmative Covenants DO NOT touch

and concern the land.
4. NO PRIVITY REQUIREMENT*
a. *Rule—in no jurisdiction is horizontal POE required for
benefit/burden to run with land.
i. Burden Side—no vertical POE
ii. Benefit Side—some jurisdictions require vertical POE
5. In writing to satisfy SoF (most of the time)
a. EXCEPTION: Courts may sometimes imply equitable servitude
despite absence of writing (see Sandborn)
i. Common Grantor with General Plan/Scheme for
uniform set of reciprocal restrictions
4. Scope of Covenants/Enforceability
a. In determining whether to enforce a restrictive covenant, courts are guided by certain
general rules of construction, which are:
i. If the language is unclear or ambiguous, resolve the restrictive covenant in
favor of the free enjoyment of the property and against restrictions
ii. Will not read restrictions on the use and enjoyment of the land into the
covenant by implication
iii. Interpret the covenant reasonably, but strictly, so as not to create an
illogical, unnatural, or strained construction
iv. Give words in the restrictive covenant their ordinary and intended meaning.
5. Termination of Covenants—covenants, like easements, can be terminated in a number of ways,
including expiration, release, abandonment, merger, estoppel, prescription, and condemnation.
They may also be modified or terminated with the consent of all interested parties (sometimes
without unanimous consent). Cases in book focus on the following two issues…
a. Changed Conditions—As long as the original purpose of the covenant can still be
accomplished and substantial benefit will inure to the restricted area by their
enforcement, the covenants stand even though the subject property has a greater value if
used for other purposes.
i. Rest.3rd Property: When a change has taken place since the creation of a
servitude that makes it impossible as a practical matter to accomplish the purpose
for which the servitude was created (e.g. residential purposes), a court may
modify the servitude to permit the purpose to be accomplished.
ii. NOTE: in both cases (see Western Land Co. and Rick) the courts enforced the
original covenants, i.e. “changed conditions” is a stringent doctrine.
1. Factors Considered (?): population increase, traffic, surrounding
commercial development
iii. Zoning Regulations: do NOT modify or terminate a covenant unless they make
compliance with the servitude illegal (see Footnote 42, pg. 789).
1. General Rule: where zoning and restrictive covenants conflict, the more
restrictive prevails.
iv. Remedy For Violation From Termination: injunctive relief, enforcement of the
covenant (see Rick v. West). Balancing of equities?
1. Do not balance the equities when there is only prospective violation
(building of hospital in the future).
2. Had the hospital already been built, then there was an action seeking
enforcement of the covenant, the courts may balance the equities.
b. Abandonment (see Pocono Springs)—(in Pennsylvania) one cannot abandon real
property (absent proof of some defect in/challenge to “perfect title”). Thus, an
affirmative covenant cannot be abandoned.

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i. In order to have abandoned property and not be held liable for responsibilities for
the property, a property holder must have voluntarily relinquished all right, title,
claim, and possession with the intention of terminating his ownership, but
without vesting it in any other person and with the intention of not reclaiming
further possession or resuming ownership, possession or enjoyment
6. Common Interest Communities (Developments)—distinctive feature is the obligation that
binds the owners of individual lots or unites to contribute to the support of common property or
other facilities, or to support the activities of an association, whether or not the owner uses the
common property or facilities, or agrees to join the association (Rest.3d Property).
a. Condominiums—provide separate ownership in fee simple of one unit in a development,
with the common areas (hallways, elevators) owned by all of the unit owners as tenants in
common.
i. Creation of Condominiums—a condominium is usually created by a declaration
of master deed, which in many states must be recorded. All unit owners are
members of a membership association
ii. CREATION AND VALIDITY OF USE RESTRICTIONS (two types)
1. Restrictions set forth in the declaration or master deed of the
condominium project.
a. Very strong presumption of validity and should be upheld even if
they exhibit some degree of unreasonableness (i.e. notice of
recorded master deed is key to presumption).
b. Non-enforcement would be proper only is such restrictions were
arbitrary or in violation of public policy or some fundamental
constitutional right or impose a burden on the use of affected
land that far outweighs any benefit.
2. Rules/restrictions promulgated by the governing board of the condo
owners association
a. Subjected to “Reasonableness Test”: uphold restrictions unless
unreasonable
i. Reasonableness requires balancing the utility of the
purpose served by the restraint against the harm that is
likely to flow from its enforcement (Rest.3d).
iii. When an association determines that a unit owner has violated a use restriction,
the association must do so in good faith, not in an arbitrary or capricious
manner, and its enforcement procedures must be fair and applied uniformly.

JUDICIAL LAND USE CONTROLS: THE LAW OF NUISANCE

1. Ancient Maxim: “Sic utere tuo ut alienum non laedas,” one should use one’s own property in
such a way as not to injure the property of another.
2. In general, a nuisance is an unprivileged, intangible interference with a person’s use and
enjoyment of their land (distinguish from trespass).
3. Private Nuisance—a private nuisance is a substantial interference that is intentional and
unreasonable OR unintentional but negligent, reckless, or abnormally dangerous. The plaintiff
must have a property interest that is affected by the nuisance.
a. Intentional Nuisance—liable for intentional nuisance “under the circumstances.” Two
tests for unreasonableness…
i. Threshold Test (Majority)—unreasonable when interference is of such a degree
beyond which ordinary property owners should not have to tolerate.
1. Similar to “I know it when I see it” test.

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ii. Utilitarian/Balancing Test—unreasonable if the gravity of the harm outweighs

the utility of the actor’s conduct (Rest.2d Torts).
1. Gravity of Harm—factors to be considered in determining the gravity
include…(Rest.2d Torts)
a. The extent and character of the harm;
b. The social value of plaintiff’s use invaded;
c. The suitability of the use invaded to the locality; and
d. The burden on the plaintiff of avoiding the harm.
2. (Social) Utility of Defendant’s Conduct
a. The social value of the purpose of the invader’s conduct;
b. The suitability of the conduct to the locality; and
c. The impracticability of preventing the harm.
3. PROBLEM: allows the defendant to win a little too often??
iii. While not controlling, defendant’s failure to use reasonable avoidance devices is
important.
b. Unintentional Nuisance—a person is subject to liability for an unintentional invasion
when his conduct is negligent, reckless, or ultrahazardous.
i. Examples: sewage system with leak due to negligence, leaking odor/gases
4. Public Nuisance—a public nuisance affects the general public, the rights enjoyed by citizens as
part of the public. The test for determining a public nuisance is the same as for private nuisance.
Usually only public officials have the right to stop a public nuisance.
a. Enforcement by private persons—a private individual may act against a public
nuisance if he can show “special injury,” different in kind from that suffered by the
public [A STANDING ISSUE]
i. Unreasonableness—
1. Whether the conduct in question significantly interferes with public
health, safety, peace, comfort, or convenience;
2. Whether the conduct is proscribed by statute or ordinance (see Spur);
3. Whether the conduct is of a continuing nature or has produced a
permanent or long-lasting effect.
b. Statutorily authorized use—such use is not a public nuisance subject to enjoyment. It
may, however, be treated as a private nuisance if special injury is shown. Zoning
ordinances are not defenses to a private nuisance.
5. Remedies—Injunctive Relief and/or Damages
a. “Balancing of the Equities”—compare the situations between injunctive relief granted
and injunctive relief denied. Similar to Restatement’s Utilitarian/Balancing Test (why
courts embrace the Threshold Test to determine whether there is a nuisance)
i. Injunctive Relief
1. Public utility of defendant’s conduct and consequences of granting
injunctive relief or damages.
a. Concern for public interest is paramount
2. Compare hardships, separate inquiry on remedy…under what
circumstances is injunctive relief appropriate.
3. Once the plaintiff gets an injunction, there are post-litigation bargaining
to buy-out the injunction
ii. Damages
1. Permanent Damages—(one lump sum award) compensation for injury,
meaning the plaintiff need not continually file a lawsuit for the injury.
There are inevitable calculating problems.
2. Temporary Damages

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b. “Coming to the Nuisance” Doctrine—moving into the vicinity of the nuisance does not
completely bar a suit for damages or injunctive relief, but it is a “relevant factor.”
c. FOUR RULES/(Outcomes)
i. Abate the activity in question by granting the plaintiff injunctive relief (see
Morgan and Estancias);
ii. Let the activity continue if the defendant pays damages (see Boomer);
iii. Let the activity continue by denying all relief;
iv. Abate the activity if the plaintiff pays damages (see Spur)
6. What Courts Have Recognized as Nuisances
a. Cases
i. Air Pollution/Nauseating Gases and Odors (see Morgan v. High Penn Oil Co.)
ii. Noise Pollution (see Estancias Dallas Corp. v. Schultz).
iii. Dirt/Smoke/Vibrations (see Boomer v. Atlantic Cement Co.)
iv. Odor/Unhealthy Flies (see Spur Industries, Inc. v. Del E. Webb Development
Co.)
b. Fear and Loathing—some courts have held that apprehension about criminal activity
and declining property values are sufficient for nuisance
c. Light and Air—generally speaking, nuisance law protects ordinary uses, not abnormally
sensitive ones.
i. Ex. Defendant’s trees block plaintiff’s solar panels, nuisance? May be nuisance
if gravity of the harm outweighs the utility of the defendant’s conduct.
d. Spite (and Spam)—courts commonly find nuisance liability in instances where a
landowner builds a structure or no use whatsoever other than to vex a neighbor.
e. Plain old ugly—most court hold that unsightliness alone is not a nuisance (unless spite is
the only motive).
7. Environmental Controls—nuisance litigation is ill-suited to other than small-scale, incidental,
localized, scientifically uncomplicated pollution problems.
LEGISLATIVE LAND USE CONTROLS: THE LAW OF ZONING—“regulation of land use by a
municipality subject to a comprehensive plan.”
1. Authority—Police Power—zoning is an exercise of the police power—essentially, the power of
government to protect public health, safety, welfare, and morals. Generally speaking, the police
power is held to reside in the state, but in the case of zoning all states have adopted enabling acts
that delegate zoning authority to local governments (see The Standard Act below).
a. Constitutional Standard—zoning laws have presumption of validity, thus the zoning
laws are essentially subject to rational basis review—the law must have a rational
(reasonable) relationship to the legitimate government interest (i.e. police power) [and
like nuisance law, taken in consideration of the surrounding circumstances and the
locality]
i. Meaning, the zoning law cannot be arbitrary and capricious.
ii. Burden on the challenger.
b. Takings Clause—a zoning regulation that takes property without compensation is a
taking, the remedy for which is an injunction or damages [not the same as an ordinance
that is void as violating due process]
i. Zoning ordinances are routinely upheld in the face of takings allegations,
especially if they are controlling nuisance-like conditions or so long as they leave
the property owner with some reasonable use.
2. The Standard (State Zoning Enabling) Act—empowers municipalities to “regulate and restrict
the height, number of stories, and size of buildings and other structures, the percentage of lat that
may be occupied, the size of yards, courts, and other open spaces, the density of population, and

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the location and use of buildings, structures, and land for trade, industry, residence, or other
purposes.
a. Legislature  Council, Executive  Mayor
b. Comprehensive Plan—(statement of the local government’s objectives and standards for
development) the regulations must be made in accordance with a comprehensive plan and
designed to lessen congestion in streets; secure safety from fire, panic, and other dangers;
to promote health and the general welfare; to provide adequate light and air; to prevent
the overcrowding of land; to avid undue concentration of population; to facilitate the
adequate provision of transportation, water, sewerage, schools, parks, and other public
requirements.
i. Only about half of the states require comprehensive plans, and sometimes only in
the weakest of terms. Why? It’s hard to predict the future, allowing for some
flexibility.
1. Zoning nowadays is more reactive than proactive, responding piece by
piece to changing conditions, unanticipated demands, and specific
proposals.
c. Ordinance/Map
i. Adopted by local legislature
d. Administrative Framework
i. Zoning (Planning) Commission—body of experts to advice council for plan and
drafting ordinance
ii. Board of Zoning Appeals (Board of Adjustment)—hears appeals on the
enforcement of ordinance/zoning regulations; appeal from board to state court
1. The legislative body cannot delegate to a local board a discretion which
is not limited by legislative standards. It cannot give a zoning board
discretionary authority to approve or disapprove applications for permits
as a board thinks best serves the public interest without establishing
standards to limit and guide a board.
3. The Nonconforming Use—a nonconforming use is one in existence when the zoning ordinance
is passed, that is allowed in the newly zoned area. A lawful nonconforming use establishes in the
property owner a vested property right that cannot be abrogated or destroyed, unless it is a
nuisance, it is abandoned, or it is extinguished by eminent domain.
a. PA Northwestern Distributors, Inc. v. Zoning Hearing Board—the amortization
(“phase-out” period) and discontinuance of a lawful pre-existing nonconforming use is
per se confiscatory, i.e. it is a “taking” (depriving P of the lawful use of its property).
i. Policy Considerations—If municipalities were free to amortize nonconforming
uses out of existence, future economic development could be seriously
compromised.
b. Majority Rule, “Balancing Test” (PA Northwestern Distributors Concurrence)—weigh
any circumstance bearing upon a balancing of public gain against private loss, including
the length of the amortization period in relation to the nature of the nonconforming use
(important—years, not just months), length of time in relation to the investment, and the
degree of offensiveness of the nonconforming use in view of the character of the
surrounding neighborhood.
c. Expansion of use to meet regular, market demand--protected
4. Achieving Flexibility in Zoning
a. Variances—a variance (municipal permission) allowing a nonconforming use may be
granted where an ordinance restrictions cause an owner practical difficulty or
unnecessary hardship, to engage in the prohibited conduct. A variance runs with the land
and may have conditions attached.
i. Elements

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1. Undue Hardship if Ordinance Enforced—regulation renders the property

unusable for any purpose (“no effective, alternative use”)
2. No Substantial Harm if Variance Granted—to public interest and the
intent and purpose of the zoning plan and ordinance
a. Burden on the challenger by preponderance of the evidence
ii. Area v. Use Variances
1. Legal test depends on use or area
a. Undue hardship = use
b. Showing of practical difficulties = area
b. Special Exceptions (Special Use Permits)—a special exception (special use) is allowed
when certain conditions specified in the ordinance are met. Courts usually uphold special
exceptions even where standards are unclear.
i. The legislative body cannot delegate to a local board a discretion that is not
limited by legislative standards. It cannot give a zoning board discretionary
authority to approve or disapprove applications for permits as a board thinks best
serves the public interest without establishing standards to limit and guide a
board.
1. A city council’s denial of a special-use permit to a single landowner is
proved prima facie arbitrary and unreasonable if it is shown that the
council failed to support its action by written findings of substantial
evidence showing the use impermissible under the permit standards of
the ordinance.
c. Rezoning/Zoning Amendments—When a municipality adopts or amends a zoning
ordinance, it acts in a legislative capacity under its delegated police powers. As a
legislative act, a zoning or rezoning classification must be upheld unless opponents prove
that the classification is unsupported by any rational basis related to promoting the public
health, safety, morals, or general welfare.
i. Minority of Jurisdictions—heightened level of scrutiny by shifting the burden to
the municipality to show the rezoning is not arbitrary and capricious.
ii. Spot Zoning—the term applies to zoning changes, typically limited to small plots
of land, which establish a use classification inconsistent with surrounding uses
and create an island of nonconforming use within a larger zoned district, and
which dramatically reduce the value for uses specified in the zoning ordinance of
either the rezoned plot or abutting property.
1. Elements to Invalidate Spot Zoning (all must be satisfied)
a. A small parcel of land is singled out for special and privileged
treatment
b. The singling out is not in the public interest but only for the
benefit of the landowner
c. The action is not in accord with a comprehensive plan
5. Aesthetic Regulation—if one can relate aesthetics to property values and the “general welfare,”
then rational basis review is applied. A majority of jurisdictions accept aesthetics as a legitimate
police power goal in itself (see Berman v. Parker)
a. Aesthetic Regulations Conflicting with Constitutional Rights
i. No court has ever held that the First Amendment protects architectural
expression, but it is the common view of commentators that design regulation,
because it implicates expressive values, should at least be subject to close
scrutiny.
ii. FREE SPEECH—(see City of Ladue v. Gilleo)
1. Time, Place, or Manner Restrictions (Four-Part Test)
a. Is the law content-neutral?

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b. Does the government have a significant or important reason for

the law?
c. Are the means narrowly tailored to achieve the asserted interest?
d. Are there ample alternative channels of communication
available?
i. Not in Ladue
2. Content-Based Restriction  Strict Scrutiny
6. Controls on Household Composition
a. Economic/Social Legislation  Rational Basis Review
i. State’s police power includes household composition
1. Ordinances restricting land use for “single-family homes only” receives
rational basis
b. Fair Housing Act (Revisited)
i. A “maximum occupancy” restriction determines the number of people allowed in
a single-family dwelling and is an exemption allowable under the Fair Housing
Act §3607(b)(1).
ii. A family composition rule did not qualify as a maximum occupancy restriction
(see City of Edmonds v. Oxford House, Inc.)

ADDITIONAL NOTES
ULTRA VIRES—EXCEEDING SCOPE OF DELEGATED AUTHORITY

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_____________________________________________________________________________________
EMINENT DOMAIN AND REGULATORY TAKINGS—it has long been accepted that a sovereign
cannot take the property of A for the sole purpose of transferring it to another private party B, even though
A is paid just compensation. A State may transfer property from one private party to another if future
“use by the public” is the purpose (not mechanics) of the taking.
1. “Public Use”—the Fifth Amendment prohibits a taking of land “for public use” without just
compensation.
a. Rule—the Supreme Court has broadly interpreted “public use” to mean the taking must
be for a public purpose (i.e. it must benefit the public, not a particular class of identifiable
individuals) (see Kelo v. City of New London).
i. Example—“Urban Renewal,” the government exercises eminent domain and then
transfers title to a private redeveloper to develop according to an urban renewal
plan. It has been upheld under a rational basis approach as being for a public
purpose.
1. Some states apply strict scrutiny or per se standards to such government
acts.
2. What is a “Taking”? (Easy case  Condemnation Action to Take Title—if the government
takes title to the land, it must pay for it).
a. Regulatory Takings—several tests have been developed to determine whether a
government regulation under its police power that goes too far and affects the use and
value of the land is a taking.
i. Threshold Question: can the government regulate? Regulate pursuant to the
government’s police power, and upheld if not arbitrary and capricious,
UNLESS…
b. Categorical Rules/Per Se Tests
i. Permanent Physical Occupation or Invasion Test—any permanent physical
occupation or invasion by the government (or by a third party with government
authorization) is a per se taking and must be paid for (see Loretto v.
Teleprompter Manhattan CATV Corp.) [principles of trespass and right to
exclude at work in this rule]
1. Applies even if the occupation affects only relatively insubstantial
amounts of space and do not seriously interfere with the landowner's use
of the rest of his land.
2. Temporary invasion, not per se taking, but subject to ah-hoc factual
inquiry to balance the factors.
3. Degree of occupation/invasion relevant to the amount of compensation.
ii. Deprivation of ALL Economical/Productive Use of Land Test—If the regulation
deprives land of all economically beneficial or productive use, it is a per se
taking. The fact that the regulation was enacted before the purchase (despite
notice) does not foreclose a takings claim (see Palazzolo v. Rhode Island). A
regulation that destroys all economic value for only a limited time  not a per se
takings (see Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning
Agency).
c. Rule of Reason (when the regulation does not deprive land of all economic use)
i. Multifactor Balance Test—(see Penn Central) not a per se rule—matter of
degree…
1. Factors to Balance
a. Diminution in value of the land (economic/market impact)
[diminution alone cannot establish taking  90% in Hadacheck
diminution is not a taking]

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i. Conceptual severance—take the property as a whole or

separate the “sticks of the bundle”
1. Example: Transferable development rights
(TDRs) on airspace for all property
2. Temporal Severance? DO NOT severe based on
the timing and length of taking
a. Would apply to normal delays = bad.
ii. Reciprocity of Advantage—offsetting negative impact or
burden of the regulation
b. Distinct investment-backed expectations
i. Interference with intention to use the land in the manner
at the time of purchase
1. Example: buy train station, intention to operate
train station.
ii. NOT HOPE or DISTANT EXPECTATIONS
c. Character of regulation/government action (i.e. trespassory or
physical invasive aspect to the regulation…may push the
regulation over the line and make it a taking)
ii. Temporary Nature of Complete Economic Deprivation
1. May, in some cases, constitute a taking.
2. But NOT a per se rule.
d. EXCEPTION—“Common-Law Nuisance Abatement,” no taking results if the
government regulates to control common-law nuisance or nuisance-like activity (i.e.
protect against a harm). However, if the regulation aims to extract a benefit, a taking
occurred and compensation must be paid (see Lucas v. South Carolina Coastal Council).
i. Police Power is BROAD
ii. Nuisance Abatement is SMALLER portion within police power
1. Does not include: Family Values, Aesthetics
2. Who Determines if Common-Law Nuisance Exists?
a. Leave to judges
3. What Constitutes a Common-Law Nuisance?
a. See Rest.2d Torts (and above under ‘nuisance’ notes)
i. The extent and character of the harm;
ii. The social value of plaintiff’s use invaded;
iii. The suitability of the use invaded to the locality; and
iv. The burden on the plaintiff of avoiding the harm.
v. The fact that other landowners, similarly situated, are
permitted to continue the use denied to the plaintiff
3. “Just Compensation”
a. Market Value—just compensation means the fair market value—i.e. the price a willing
buyer would pay a willing seller. Market value includes the value of possible future
expectations as well as existing uses
b. No constitutional violation has occurred until just compensation has been denied!
I.e. the issue is not ripe until the state denies compensation.
4. Judicial Taking?
a. Walton County v. Stop the Beach Renourishment, Inc., 998 So.2d 1102 (2008)

EXACTION—exactions are local government measures that require developers to provide goods and
services or pay fees as a condition to getting project approval.
1. See note 1 on page 1057

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SECURED TRANSACTIONS
Professor Jose Bartolomei, Michaelmas Term 2011

INTRODUCTION—The Uniform Commercial Code (UCC) provides a priority scheme to creditors and
awards those creditors that provide notice and punishes those that are secretive. Perfection of the security
interest is the ultimate goal of any creditor taking an interest in the debtor’s collateral. Creditors with
perfected security interests beat out bankruptcy trustees and win over non-bona fide purchasers [BFPs].
1. Basic Definitions
a. Lien: An interest in the debtor’s property given by the law to protect a creditor.
b. Consensual Lien: If a debtor voluntarily grants an interest in his property, a consensual
lien is created.
c. Mortgage: Consensual lien in the debtor’s real property.
d. Security Interest: Consensual lien in the debtor’s personal property or fixtures
(governed by Article 9).
e. Judicial Lien: An involuntary lien imposed against the debtor’s property that arises
from judicial proceedings.
f. Statutory Lien: An involuntary lien imposed by either statute or the common law in
favor of certain creditors the law deems worthy of protection.
g. Mechanic’s Lien: A statutory lien in favor of those who perform construction work.
h. Federal Tax Lien: If you don’t pay your taxes, the federal government files for this
statutory lien that reaches all of the taxpayer’s property.
i. Strong Arm Clause, §544(a) of the Bankruptcy Code: As of the date of filing of the
bankruptcy petition, the trustee is conclusively presumed to occupy the legal position of a
judicial lien creditor who has levied on all of the bankrupt’s property.
i. Secured creditors whose security interests are unperfected at this moment lose
the right to claim the collateral.
ii. Secured creditors whose security interests are perfected at this moment will
survive the attack of the bankruptcy trustee.
2. Bankruptcy—the United States Constitution states that Congress shall pass laws pertaining to
bankruptcy; the result is the Bankruptcy Reform Act of 1978, 11 U.S.C. §§101 et seq.
a. Four Types of Bankruptcy—Chapter 7, Straight Bankruptcy (a pure liquidation
proceeding); Chapter 11, Reorganization Proceeding for Businesses; Chapter 12,
Reorganization Proceeding for Farmers; Chapter 13, Debt Repayment Plan for
Individuals.
b. Commencement—to commence a bankruptcy, the debtor (voluntary bankruptcy) or the
debtor’s creditors (involuntary bankruptcy) file a petition with the bankruptcy court.

THE SCOPE OF ARTICLE 9—UCC Article 9 sets out a comprehensive set of rules governing secured
transactions in personal property. The article states what a debtor and creditor must do to make the
transaction effective (attachment or creation); what the creditor must do to give notice making the
transaction effective against other parties (perfection); who wins when collateral is in contest (priority);
and, what a creditor may and may not do to repossess the collateral and sell it to get paid (default).
1. Security Interest Defined (See UCC §1-201(35))—A security interest is an interest in personal
property and fixtures which secures payment or performance of an obligation.
a. Note: Real estate is excluded.
b. SI includes any interest of a consignor and a buyer of accounts (credit card receivables),
chattel paper (automobile lease contracts), a payment intangible, or a promissory note in
a transaction, agricultural lien that is subject to Article 9.
c. A sale of accounts is subject to A9 because when sold, there is an ostensible ownership
issue (creditors don’t know).

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2. UCC §9-109
a. (a) [tells use what is subject to Article 9]
i. Security interests are consensual (contract)
ii. Scope applies to a transaction that creates a SI in personal property or fixtures,
agricultural lien, sale of accounts, chattel paper, payment intangibles, promissory
notes, and a consignment.
iii. Article 9 “Debtor” defined in §9-102(a)(28)
iv. Outright sales are covered under Article 9 (OC4) to avoid secret sales and give
other creditors notice through perfecting interest (file FS)
b. (c) and (d) [tells us what removes us out of Article 9]
i. Collateral you receive non-consensually is not a security interest, including, but
not limited to, statutes, liens other than agricultural, and assignments
(garnishments).
3. Consignment §9-102(20)—a true consignment is neither a sale nor a security device; it is a
marketing procedure by which the owner of goods (consignor) sends (consigns) goods to a
retailer (consignee) for sale to the public. Essentially, the consignee is a bailee with the ability to
sell the bailor’s goods. Class Example—selling Air Jordans
a. Benefits—consignor retains control over the terms of the retail sale, and there is no
requirement that the consignor file a notice anywhere announcing that a consignment is
going on.
b. Problem—the retailer appears to be the unfettered owner of goods in inventory that
actually belongs to someone else. The retailer’s other creditors may wish to extend credit
with the inventory as collateral, but there is no place they can go to check whether some
or all of the inventory is actually held on consignment.
i. Some consignments are actually sales on credit (i.e., secured transactions)
disguised as consignments in order to escape the filing requirements.
1. If the retailer must pay for goods whether or not they are able to resell
them, this is not a true consignment.
c. Where the consignee is generally known by its creditors to be substantially engaged in
selling the goods of others, the §9-102(a)(20)(A)(iii) definition of "consignor" is not
met, and Article 9 does not require the consignors to do anything to protect their
interests, leaving the matter to other law. The common law generally allowed a true
consignor to retrieve its goods from the claims of the consignee's creditors. See Ludwigh
v. American Woolen Co.
4. Leases (§1-203)—are not covered by Article 9 unless the so-called lease is actually a disguised
attempt to create a security interest in leased property that is being sold to the “lessee.”
a. True Lease Compared with Secured Interest—whether the transaction is a true lease
or a disguised sale on credit depends on the facts of each case, but a sale on credit will be
presumed if
i. The lessee has no right to terminate the lease, and
ii. Either the lessee has an option to purchase for no or nominal consideration or
iii. The goods will have no economic value at the end of the lease term.
b. Protective Filing—a lessor who is unsure whether the transaction is a true lease or a
disguised sale may file a financing statement to guarantee priority if appropriate, without
conceding that Article 9 applies.
i. 9-505’s “Safe Harbor”—this section affords the option of filing of a financing
statement with appropriate changes of terminology but without affecting the
substantive question of classification of the transaction. Comment 2.
c. ADD NOTES FROM CASEBOOK PGS. 22-23

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5. Transactions EXCLUDED From Article 9

a. Federal Statutes (§9-109(c)(1))—federal law preempts state statutes (including Article
9) to the extent it governs rights of parties to the security agreement or rights of third
persons. Federal statutes in part, govern ship mortgages, aircraft titles, patents and
copyrights, railroad equipment, and some interstate commercial vehicles. Creditors end
up as unsecured creditors
i. Federal Loans Exception—federal loans are governed by the UCC.
ii. Intellectual Property—When in doubt, file everywhere! Until Congress or the
Supreme Court clarifies things (something not on the horizon at present), it will
remain unsettled whether state or federal filing is required to perfect a security
interest in patents, trademarks, and copyrights. A creditor, however, can be
assured of perfection by filing in both the relevant federal and state offices. The
catch is, that course of action requires a separate filing for each patent,
trademark, or copyright.
b. Statutory Liens [Not on Exam]—such liens are not consensual and excluded from
Article 9.
i. NOTE: If the security interest is contractually based (or just plain consensual),
Article 9 applies.
c. Claims Arising Out of Judicial Proceedings—these are excluded except for
commercial tort claims and settled tort claims.
d. Wage or Salary Assignments [Not on Exam]
i. Comment 11 to §9-109 – Wage and Similar Claims – As under former §9-104(d),
subsection (d)(3) excludes assignments of claims for wages and the like from this
Article. These assignments present important social issues that other law
addresses. The Federal Trade Commission has ruled that, with some exceptions,
the taking of an assignment of wages or other earnings is an unfair act or practice
under the Federal Trade Commission Act. State statutes also may regulate such
assignments.
ii. State Statutes may regulate assignments of wages
1. Some absolutely prohibit the assignment of future wages
2. Some permit in limited circumstances if the employer consents
3. Some require the consent of both the employer and the spouse
iii. Note: Wage assignments of independent contractors are NOT excluded from A9;
independent contractor IF he sells policies for many companies.
iv. Note—commissions are a contract right to payment, not wages. Seems like a
distinction without a difference, but Article 9 would apply in this situation.
e. Non-Financing Assignments (§9-109(d)(4)-(7))—these assignments (such as
assignments for collection, couples with a performance obligation, or as part of a sale of
a business) are isolated “one shot” transactions and are excluded from Article 9. Where
the sale arises out of the sale of business, i.e. you are selling everything and not just the
accounts, it is no longer covered under Article 9.
i. There is no longer an ostensible ownership issue; the possibility of deception of
later parties is small. The assignments are of a non-financing nature
ii. Examples
1. The sale of the business and its accounts? 9-109(d)(4).
2. The transfer of the job (and its commission) to another artist? 9-
109(d)(6) (…to an assignee that is also obligated to perform under the
contract.”)
3. The transfer of the account for collection purposes? 9-109(d)(5).
4. The transfer of a single account to satisfy “preexisting indebtedness”? 9-
109(d)(7).

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f.
Real Estate (Lease or rents thereunder) (§9-109(d)(11))—except for fixtures, Article 9
does not cover real estate security interests; you cannot take a security interest in real
property. [probably not on exam]
i. Exception: You can take a SI in a promissory note/mortgage where the note is
sold or a SI is given to you in the note to secure X’s obligation to you.
1. Article 9 covers the security interest in the promissory note even though
the note is secured by a real-property mortgage.
2. File a FS. If X doesn’t pay you, you take the notes and direct payment
straight to you instead of X.
3. §9-203(g): If you attach (take a right in the collateral) in the promissory
note, you automatically attach in the supporting obligation (mortgage)
even if it is real property.
4. §9-308(e): If you are perfected in the original collateral (the note), you
are perfected in the supporting obligation.
_____________________________________________________________________________________
THE CREATION OF A SECURITY INTEREST There are two things that must be done in order for a
security interest to become effective: Attachment and Perfection
1. Classifying the Collateral—proper classification of the type of collateral involved is necessary
for application of the appropriate Article 9 rule. Classification of collateral is to be determined as
of the time of the creation of the security interest. Classification does not change because of a
later change in the manner in which the collateral is used. See In re Troupe. The borrower’s
stated intent regarding that use of the collateral, if affirmatively made, can control the
determination of what the collateral is for Article 9 purposes. Absent a clear statement from the
borrower to that effect, we look to the actual use of the collateral to determine what Article 9
category it falls into.
a. Tangible Collateral/“Goods”—“goods” include things that are moveable and includes
unborn young of animals, crops, timber to be cut, fixtures, and computer software
embedded in goods.
i. Four Types of Goods
1. “Consumer Goods” §9-102(a)(23)—goods used or bought primarily for
personal, family or household purposes.
2. “Inventory” §9-102(a)(48)—includes goods held for sale or lease to
other in the ordinary course of business. It also includes raw materials
and materials used up or consumed in a business (e.g., pencils).
Consumed in a short period of time
3. “Farm Products” §9-102(a)(34)—goods that are used or produced in
farming operations3 and that are in the possession of a farmer-debtor.
4. “Equipment” §9-102(a)(33)—includes goods used in a business when
they are fixed assts or have, as identifiable units, a relatively long use
period [anything that does not fit in the other three types]
b. Quasi-Tangible Collateral—these are legal rights often represented by a writing.
i. Five Types of Quasi-Tangible
1. “Instruments” §9-102(a)(47)—include UCC Article 3 negotiable and
nonnegotiable instruments (e.g., checks, promissory notes, etc.)
a. Promissory Notes

3
Farming operation means raising, cultivating, propagating, fattening, grazing, or any other farming, livestock, or
aquacultural operation.

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2. “Documents” §9-102(a)(30)—means a UCC Article 7 “document of

title” (e.g., a warehouse receipt or a bill of lading).
3. “Chattel Paper” §9-102(a)(11)—refers to a record (i.e., written or
electronically stored information) or a combination of records that
contain both a promise to pay and a security interest in or lease of
specific goods. Electronically stored chattel paper is “electronic chattel
paper.” (Includes secured negotiable promissory notes)
a. tractors, printing presses, seller retains security interest and
contract to pay over time
4. Letter of Credit Rights §9-102(a)(51)—in a typical letter of credit
transaction, a seller of goods requires the buy to get a letter of credit
from a bank in favor of the seller, so that the bank makes payment to the
seller. Article 9 governs the seller’s rights against the bank issuing the
letter of credit, when used as collateral.
5. “Investment Property” §9-102(a)(49)—includes stocks and bonds
(“certified securities”), and commodity contracts and accounts in which
stocks and bonds are held (“uncertified securities”), and are given special
treatment in Article 9.
c. Intangible Collateral—intangible collateral has no physical form.
i. Four Types of Intangible
1. Accounts §9-102(a)(2)—refers to a right to payment for goods or
services sold or leased, which is not contained in an instrument or chattel
paper, or for services rendered or to be rendered (also includes non-
negotiable promissory notes or some other written contract evidencing
buyer’s obligation to pay creditor). Includes lottery winnings…
a. Health-Care-Insurance Receivables (subcategory of accounts)
§9-102(a)(46).
i. §9-109(d)(8) says that article 9 does not cover
assignment of HIP, but makes exception for assignment
to a health care providers.
b. There is no difference between the sale of accounts and the
assignment of accounts as security. Compare 9-109(a)(3) (sale)
with 9-109(a)(1) (security interest).
2. Deposit Accounts §9-102(a)(29)—include checking, savings, and
passbook accounts.
a. NOTE: Article 9 does not cover consumer deposit accounts
(those used for personal, family, or household use) except to the
extent they include proceeds.
3. Commercial Tort Claims—these are claims filed by organizations (e.g.,
corporations and partnerships), and business-related, non-personal injury
claims filed by individuals.
4. General Intangibles §9-102(a)(42)—this term refers to personal
property used as collateral that does not fit into any other category (e.g.,
literary rights, good will, tax refunds). Many courts have held that a
security interest can be perfected in a liquor license. Software not
embedded in goods is also a general intangible.
a. “Payment Intangibles” are general intangibles under which the
account debtor’s principal obligation is the payment of money
(e.g., oral promise to repay loan). §9-102(a)(61)

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2. Technical Validity of the Forms

a. Security Agreement §9-102—a security agreement is a contract between the debtor and
the creditor by which the debtor grants to the creditor (the secured party) a security
interest in the collateral; the purpose is to create property rights between the debtor and
the creditor.
i. Requirements—the security agreement must:
1. Be authenticated by the debtor, and
a. Where the collateral is in the possession of the secured party, no
written security agreement is required by law (oral agreement is
sufficient)
2. Describe the collateral (plus the land if timber is involved)
a. The description is sufficient if it reasonably identifies what
collateral the parties intended the security interest to cover,
including property the debtor may acquire in the future. §9-108
i. “Floating Liens”—liens attaching to an aggregation of
collateral (e.g., inventory).
ii. “After-Acquired Property Clause”—you can have one in
a security agreement to capture the concept that
collateral obtained by the debtor after the execution of
the original security agreement serves to support the
value provided by the secured creditor.
iii. “Future Advance Clause”—so-called Dragnet clauses
allowed by 9-204(c), allows for later loans to be satisfied
by previous collateral if loans for “same class/category”
unless you adhere to Comment 5.
b. Exception – commercial tort claims/consumer goods/consumer
securities accounts/consumer commodity accounts must be
described more specifically.
b. Financing Statement § 9-501—a financing statement is the notice that is filed in the
place specified in §9-501 by the creditor (and indexed under the debtor’s name) in order
to give later creditors an awareness that the collateral is encumbered; the purpose is to
create property rights in the creditor against most of the rest of the world.
i. §9-502(a) Requirements
1. Identify the parties (legal names and addresses of both the debtor and
the secured party/representative of secured party), and
a. Under UCC Article 9, a debtor’s identity is seriously misleading
if it cannot be discovered using the state’s standard search logic.
§9-506.
i. A financing statement is effective if a computer search
run under the debtor’s correct name produces the
financing statement with the incorrect name, and the
reasonable limit consists of one page “previous” or
“next” from the initial result screen.
b. If debtor changes name, secured party has four-month period
(safe harbor) to change financing statement. See §9-507(c)
2. Indicate/Describe what collateral is covered (§9-504)
a. It need not specify the property encumbered by a secured party’s
lien, but need merely notify subsequent creditors that a lien may
exist and that further inquiry is necessary “to disclose the
complete state of affairs.”

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b. You do not need to refer to an after-acquired property clause in

the financing statement to have it be effective. See Comment 7
to §9-204.
ii. §9-516 Rejection of Financing Statement—all the reasons why a UCC financing
statement can be rejected; included are a few more requirements…
1. Mailing address of debtor;
2. Mailing address of secured party;
3. Whether the debtor is an individual or an organization;
4. If the debtor is an organization…
a. The type of organization (LLC, Inc., etc.);
b. The jurisdiction of organization; and,
c. Either an organization number or an indication that the debtor
has not such number.
c. The Wise Creditor Will –
i. Make sure all the forms are correctly filled out in all particulars;
ii. Check the debtor’s technical legal name now and in the immediate part and make
sure it is correctly listed on all the documents;
iii. Refile if the debtor’s name changes in any way;
iv. Describe the collateral as accurately and completely as possible in all documents;
v. Inquire into the source of the debtor’s title to ensure that the former owner’s
creditors have no valid claims.
3. ATTACHMENT of the Security Interest (MEMORIZE)—attachment is the process by which
the security interest in favor of the creditor becomes effective against the debtor. Perfection is the
process by which the creditor’s security interest becomes effective against most of the rest of the
world.
a. §9-203(b) Requirements –
i. A security agreement must be signed by the debtor, or the creditor must have
possession or control of the collateral, pursuant to an oral agreement with the
debtor;
ii. The creditor must give value (defined in §1-204); and,
1. Value can be in the form of consideration that would support a contract,
an antecedent debt owed the creditor, a buyer’s acceptance of delivery
under a contract of sale, or a binding commitment by the creditor to give
future value (evidenced by letter/email).
iii. The debtor must have some rights in the collateral or power to transfer rights.
1. Rights in collateral include full ownership and limited rights that fall
short of full ownership (full title in collateral is not required). Mere
possession of the collateral is insufficient to support an attachment. The
debtor must have acquired sufficient rights in the collateral.
2. Any purported restriction on the debtor’s right to transfer collateral is
void and unenforceable.
_____________________________________________________________________________________
PERFECTION OF A SECURITY INTEREST (9-301 to 9-306)—there are four methods of perfection
1. Filing a Financing Statement—the most common method of perfection is by filing a financing
statement indicating the security interest and generally describing the type of collateral covered in
the place provided by UCC §9-501 (usually the secretary of state’s office)
a. This is the only method for accounts and general intangibles
b. Duration of Perfection—a financing statement is effective for five years and then it
lapses unless a continuation statement is filed. See 9-515(a). Renew within six-month
period before termination.

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2. Perfection by Possession (Pledge)—possession of the collateral by the creditor (a pledge)

perfects the creditor’s security interest in the collateral as soon as all requirements for attachment
have been met.
a. Types of Property Covered—goods, money, negotiable documents, instruments,
certified securities, or tangible chattel paper are perfected by possession
b. Means of Taking “Possession”—the creditor must have physical control sufficient to
put third parties on notice but the means of acquiring control very according to the type
or location of the collateral
i. Inventory—the common method for possessing inventory if by field warehousing
ii. Goods in Possession of Bailee—if goods are in the possession of a bailee, a
creditor can indirectly take possession through the bailee using the following
methods . . .
1. Goods Covered by Negotiable Document of Title—possession of the
document perfects a security interest in both the document and the goods
covered by the negotiable document
2. Goods Covered by Non-Negotiable Document of Title—a secured party
can perfect a security interest in the goods covered by the nonnegotiable
document by having the document issued directly to the secured party or
by sending the bailee a notice of the secured party’s interest in the goods.
3. Bailment With No Document of Title—the secured party can perfect a
security interest in such goods by getting the bailee to authenticate a
record acknowledging that the bailee holds the goods for the benefit of
the secured party.
c. Duration of Perfection—perfection by possession lasts only as long as the secured party
has possession (public finance transactions and manufactured home transactions are
effective for 30 years).
i. Temporary Surrender—creditor may turn over possession without losing
perfection, called surrender “for temporary and limited purpose.”
3. Automatic Perfection—perfection occurs in some situations without filing once attachment of
the security interest has happened. See §9-309.
a. Purchase Money Security Interest (PMSI) in Consumer Goods—a purchase money
security interest in consumer goods is automatically perfected on attachment of the
security interest.
i. “Purchase Money” Transactions—a purchase money security interest arises when
the secured party sells the goods to the purchaser on credit or advances the
purchaser the money used to purchase goods. 9-103.
1. Note—the creditor must have an authenticated security interest
agreement with the debtor to have a valid security interest.
ii. “Consumer Goods”—in determining whether the goods are truly to be used for
consumer purposes (and hence qualify for automatic perfection), the debtor’s
primary use of the collateral determines its type.
iii. Exceptions—Motor Vehicles and Fixtures—there can be no automatic perfection
for the following types of collateral, even if they are used for consumer purposes:
1. Motor Vehicles covered by certificate of title (a notation on the
certificate of title is required); and,
2. Fixtures (a fixture filing is required)
b. Beneficial Interest in Decedent’s Estate—perfection is also automatic in the assignment
of a beneficial interest in a decedent’s estate.

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c. Certain Accounts and Other Intangibles—automatic perfection occurs in the

assignment of an insignificant portion of the debtor’s outstanding accounts or payment
intangibles.
i. Significant = substantial portion
d. Sale of Promissory Notes and Payment Intangibles—a buyer of promissory notes and
payment intangibles is automatically perfected (sales of such collateral are covered by
Article 9-309)
e. Temporary Perfection—temporary “automatic” perfection allowed in certain situations:
i. New Value Given—a creditor as to negotiable documents, instruments, or
certificated securities, who advances new value to the debtor obtains a 20-day
perfection period form the moment of attachment.
ii. Other Twenty-Day Extensions—if a secured party gives the debtor instruments,
certificated securities, negotiable documents, or goods that were in the hands of a
bailee and not covered by a negotiable document for the purpose of ultimate sale,
shipping, etc., the security interest in the collateral is perfected for 20 days after
the secured relinquishes possession. See §9-312(e).
f. Failing of Filing Office—the failure of the filing office to index a financing statement
correctly does NOT affect the effectiveness of that financing statement. §9-517.
4. Perfection by Control—§9-314(a) provides that a “security interest in investment property,
deposit accounts, letter-of-credit rights, or electronic chattel paper may be perfected by control of
the collateral under §§9-104, 9-105, 9-106, 9-107.” Control generally means that the secured
party has taken the steps described in these sections, so it is obvious to anyone investigating
the state of the collateral that the secured party has rights therein.
Perfection of the Security Interest
Filing Only Filing and/or Possession Control Filing and/or Automatic
Possession Only Only Control
Accounts, Goods, Money Deposit Investment PMSI in
General Negotiable §9-312(b)(3) Accounts, Property, consumer
Intangibles, Instruments, Letter of Electronic goods, casual
Commercial Tangible Credit Chattel Paper or isolated
Tort Claims Chattel Paper Rights assignments,
sales of
promissory
notes,
supporting
obligations
where the
original SI is
perfected

_____________________________________________________________________________________
PLACE OF PERFECTION —MULTISTATE TRANSACTIONS—UCC § 9-301 deals with the problems
of multistate transactions and removal of collateral from one state to another.
1. General Choice of Law Rule—Debtor’s Location Governs Perfection—the law of the state
where the debtor is located generally governs perfection. When there is doubt as to whether or
where to file, a wise attorney will file a financing statement in every place arguably relevant to
the transaction.

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a. § 9-307—Debtor’s Location—a corporation is located in the place of its incorporation.

An organization other than a corporation (e.g., a partnership) is located at is place of
business (i.e., the place where the organization conducts its affairs) if it only has one
place of business and at its chief executive office it is has more than one place of
business. An individual is located in the place of her primary residence.
i. Foreign Debtors—if a debtor is located in a foreign country, that country’s laws
govern perfection if its laws are similar to the relevant Article 9 provisions.
Otherwise, the District of Columbia is considered the debtor’s location.
b. Exceptions
i. Possessory security interests and security interests in fixtures and timber to be
cut—the law of the state in which the collateral is located governs the perfection
of these types of security interest.
ii. Minerals—the law of the states in which the wellhead or minehead is located
governs the perfection of a security interest in minerals.
iii. Goods covered by certificate of title—the perfection of a security interest in such
goods (e.g., cars) is governed by the state issuing the certificate of title.
iv. Deposit accounts, investment property perfected by control, and letter of credit
rights—the law governing such collateral is generally determined by agreement
between the debtor and the bank, securities intermediary, etc.
1. Exception—the law of the state in which the certified security is located
governs the perfection of a security interest in a certificated security.
v. Agricultural Liens—the law of the state in which the farm product covered by the
lien is located governs the perfection of an agricultural lien.
c. Location of Collateral Governs Issues Other than Perfection—the law of the state
where the collateral is located governs the effect of perfection and issues of priority.
d. Change of Debtor’s Location—if the law of the state in which the debtor is located
governs perfection and the debtor moves to a new state, the secured party must reperfect
under the laws of the new state within four months after the move. A new perfection
within the four months relates back to the date of the original perfection. §9-316.
i. Effect of Failure to Reperfect—if the secured party fails to reperfect within the
four months, the interest becomes unperfected as against any purchaser and any
later perfection does not relate back.
ii. Change in Identity—when a debtor changes its identity and becomes a “new
debtor” (e.g., if a corporate debtor merges with another company or sells the
collateral to a buyer who assumes the debt) and the new debtor is located in a
different state than the old debtor, the original perfection against the old debtor
lasts for one year.
_____________________________________________________________________________________
PRIORITY—SIMPLE DISPUTES
1. Definitions—The Claimants
a. Obligor and Debtor—the person owing the payment or other performance of the
secured obligations is the “obligor,” and the owner of the collateral is the “debtor.” Often
the obligor and the debtor are the same person.
b. Unsecured (General) Creditor—an unsecured creditor is one who has no security
interest I the collateral but only a personal claim against the debtor.
c. Judicial Lien Creditor—a creditor who has acquired a lien on the debtor’s property
through the judicial process is a judicial lien holder. Under the UCC, “lien creditor” also
includes a trustee in bankruptcy, and the lien arises the moment the bankruptcy petition is
filed.

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d. Secured Creditor—a creditor with an attached security interest in the debtor’s collateral
is a secured creditor.
e. Perfected Secured Creditor—a creditor who has taken the steps necessary to perfect the
security interest is both perfected and secured.
f. Statutory Lien Holder—this is a creditor who has an automatic statutory or common
law lien (e.g., landlord, mechanic, etc.)
g. Buyers of Property—note that a good faith buyer of the collateral is often favored over
the debtor’s creditors.
2. Priority With Unperfected Creditors (§9-317)
a. Unperfected Creditor v. Other Unperfected Creditor (First to Attach)—where there
are two conflicting security interests in collateral, neither of which has been perfected,
the order of attachment determines priority.
b. Unperfected Creditor v. Perfected Creditor/Judicial Lien Creditor/Statutory Lien
Holder—a perfected creditor/JLC/SLH has priority over an unperfected creditor. This
rule applies regardless of which creditor’s interest attached first and regardless of the
perfected creditor’s knowledge of the other’s interest.
3. Priority Among Perfected Creditors (§9-322(a)(1)-(3))
a. General Rule—First to File or Perfect—as between two perfected security interests,
priority goes to the creditor who either filed first or perfected first (except as modified by
the special rules below). Knowledge of another creditor’s interest and time of attachment
is irrelevant.
b. New Debtors—if two different debtors, each of whom have given creditors security
interests in their collateral, merge into a “new debtor,” the original security interest
continue in the new debtor without the need for a new security agreement or financing
statement, and the usual rules of priority apply.
4. Priority Among Perfected Creditors—Special Rules for Purchase Money Security Interests
a. Introduction—a PMSI may have “super-priority” status, beating out claims against
previously perfected security interests.
b. Consumer Goods—where the collateral is consumer goods, no further steps are required
for a PMSI therein to prevail over prior or later interests.
c. §9-324(a) Non-inventory, Non-livestock PMSIs—a PMSI in such collateral has priority
over conflicting security interests in the collateral and its identifiable proceeds if the
PMSI is perfected when the debtor takes possession of the collateral or FS filed within 20
days thereafter (thus, 20 days after it is identified as collateral).
d. §9-324(b) PMSI in Inventory (and Livestock)—a PMSI in inventory (and livestock)
has superpriority over an earlier perfected interest if . . .
i. The PMSI is perfected at the time the debtor receives possession of the inventory;
1. Perfection may be achieved by possession.
2. Constructive possession by the debtor is sufficient.
ii. The PMSI creditor gives written notification to all holders of competing security
interest which has UCC-1 financing statements on file when the PMSI creditor
files its UCC-1;
iii. The competing secured creditor receives the notification within five years before
the debtor receives possession of the inventory; and,
1. Debtor must receive actual possession of the inventory.
2. 6 months for livestock
iv. The notification states “that the person giving the notice has or expects to
acquire a PMSI in inventory of the debtor, describing such inventory by item or
type.”
e. Conflicting PMSIs in Same Collateral—if more than one creditor has PMSI super-
priority in the debtor’s goods, a seller taking a partial security interest in the goods sold

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has priority over a lender who lends money to the debtor for a down payment on the
goods. See §9-324(g). [vender beats lender]
f. Consignments in Inventory—have to follow PMSI rules of 9-324(b). See §9-103(d).

CONTROL AND PRIORITY—the 1999 revision of Article 9 makes much of the ideas of control as a
means of perfection. Taking the steps for control gives the world some notice at least that the creditor has
legal rights in the intangible property that must be respected.
1. §9-328 Control Over Investment Property—a security interest in investment property is taken
in two ways: the filing of a financing statement and/or taking of control over the investment
property, with the latter trumping the former (see §9-328(1)).
a. Sub-Definitions
i. Certificated Security, §8-102(a)(4), security represented by a certificate.
1. E.g., stock, bonds (represented by paper)
ii. Uncertificated Security, §8-102(a)(18), security not represented by a certificate.
1. E.g.,
iii. Securities Entitlement, §8-102(a)(17), the rights and property interest of an
entitlements holder with respect to a financial asset specified in Part 5 of Art. 8.
1. E.g., IRA account holder, brokerage account.
b. Control is the primary method for perfecting a security interest in investment property.
Filing is a distant second. See 9-328(1).
i. Priority Control Trumps Filing.
c. § 8-106 Control (Prof wants to test this, but currently unable to think of question)
i. Certificated Security
1. Held by the debtor, “control” requires that the certificate be “delivered”
to the secured party. §8-106(b)
a. Delivery, 8-301(a)
2. If the certificate is in bearer form, the secured party need only gain actual
or constructive possession.
3. If the certificate is in “registered form,” meaning that it specifies the
debtor as the person entitled under it, the secured party must gain actual
or constructive possession AND must also either obtain the debtor’s
indorsement (i.e., signature) on the certificate OR having the certificate
registered with the issuer in the secured party’s name. §8-106(b)(1) and
(2).
a. This last step might occur, for example, if the debtor surrenders
the certificate to the issuer and it is reissued showing the secured
party as the entitled person.
ii. Uncertificated Security
1. Held directly by the debtor, “control” is established by “delivery” to the
secured party. § 8-106(c)(1).
a. “Delivery” in this context means that the issuer of the security
has registered the secured party on its books as the owner of the
security. §8-301(b).
2. Control can also be achieved for an uncertificated security without
delivery only if the issuer agrees to comply with the secured party’s
orders without the further consent of the debtor. §8-106(c)(2).
iii. Securities Entitlements
1. Are held through a security intermediary, usually a broker (think Charles
Swab/Raymond James)
2. A secured party can acquire “control” of security entitlement either by
becoming the entitlement holder on the books of the broker, OR by

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having the broker agree to comply with the secured party’s orders
without further consent from the debtor. §8-106(d)(1) and (2).
iv. LOOK AT WHALEY PROBLEM 74 (to walk through most of this and more)

2. §9-327 Control Over Deposit Accounts—banks often take a security interest in the deposit
account of a commercial borrower as a way to trigger control upon default.
a. Control §9-104—a secured party has control of a deposit account if . . .
i. The secured party is the bank with which the deposit account is maintained;
ii. The debtor, secured party, and bank have agreed in an authenticated record that
the bank will comply with instructions originated by the secured party directing
disposition of the funds in the deposit account without further consent by the
debtor; or,
iii. The secured party becomes the bank’s customer with respect to the deposit
account.
b. Priority §9-327—depends on how you control
i. When secured party becomes customer to the account, you have priority over the
bank.
3. §9-329 Control Over Letters of Credit Rights
a. Control §9-107—a secured party has control of a letter-of-credit right to the extent of
any right to payment or performance by the issuer or nominated person if the issuer or
nominated person has consented to an assignment of proceeds of the letter of credit.
b. Effect of Control v. Non-Control—secured party with control prevails over secured
party without control. Priority determined by time of obtaining control. §9-329
4. If more than one creditor has control, the first creditor to gain control has priority. §9-328(2)
a. Exceptions
i. A securities intermediary has super-priority over all other creditors with an
interest in a securities account, even those who have control. §9-328(3)
ii. A depository bank holding a deposit account has a superior right of setoff in the
deposit account for debts owed to it by the depositor, and prevails over another
creditor having control over the deposit account, unless the creditor obtained
control by putting the account in its own name, in which case it prevails over the
bank’s right of setoff. §9-327(4)
BUYERS
1. General Rule—a buyer of collateral covered by a perfected security interest generally takes the
collateral subject to the security interest.
a. Exceptions
i. §9-320 & 1-201(b)(9) Buyers in Ordinary Course of Business—means “a
person who in good faith and without knowledge that the sale to him is in
violation of the ownership rights or security interest of the third party in the
goods buys in the ordinary course from a person in the business of selling goods
of that kind.”
ii. List of Qualifications
1. Buyer buys “goods”, §9-201(a)(44)
2. Person must be a buyer in the ordinary course of the seller’s business
(i.e., buying the seller’s inventory in the routine/customary/usual way);
a. Seller is not a pawnbroker
3. Who does not buy in bulk (that is, does not buy an entire inventoried
business) and does not take the interest as security for or in total or
partial satisfaction of a preexisting debt (that is, the buyer must give
some form of “new” value);

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4. Who buys from one in the business of selling goods of that kind (that is,
cars from a car dealer, i.e., inventory);
5. Who buys in good faith and without knowledge that this purchase is in
violation of others’ ownership rights or security interests;
6. Who does not buy farm products from a person engaged in farming
operations;
7. The seller’s creditor must part with possession;
8. The competing security interest must be one “created by the buyer’s
seller.”
iii. Possession Requirement—only a buyer that takes possession of the goods or
has a right to recover the goods from the seller under Article 2 may be a buyer in
ordinary course of business.
1. Includes “constructive possession.” See In re Western Iowa Limestone
(where there is a completed sale, the goods can be identified under the
contract, and the agreement in the bill of sale between the seller and the
buyer allows the goods to remain on the seller’s premises until resold).
iv. Garage-Sale Exception, §9-320(b), if a buyer purchases a goods at a garage sale
and does not have knowledge of the seller’s unpaid interest in the goods, then
buyer wins priority battle.
2. Waiver—priority can be lost where the secured party’s failure to enforce the security agreement
is found to constitute a waiver (e.g., permitting the debtor to sell the collateral without obtaining
the consent of the secured party). See Clovis National Bank v. Thomas.
LEASES
1. § 9-321(c) and § 2A-307.
a. Summary of 2A-307
i. Creditor of a lessee takes subject to a lease
ii. Creditors of a lessor takes subject to lease, unless the creditor holds a lien that
attached to the goods before the lease became enforceable.
iii. Lessee takes subject to security interest of secured creditor, but see 9-321, 9-323
and 9-317 for exceptions.
b. See Whaley Problem 89 (and remember how determining whether a “lease” is a true
lease or disguised security interest per 1-203 may affect the relative priority between the
purported lessee, lessor and the party claiming a security interest).
i. KNOW THIS PROBLEM
ARTICLE 2 CLAIMANTS (WILL MOST LIKELY BE ON EXAM)
1. Article 2 Security Interests—under certain circumstances, Article 2 creates possessory “security
interests” in favor of buyers and sellers of goods (e.g., when buyer rejects defective goods
tendered by the seller). Possession alone is the means of perfection for such interests. (no
security agreement or financing statement is required).
a. 11 U.S.C. §546(c) recognizes the right to reclamation that a seller may have under
applicable nonbankruptcy law. A seller may reclaim goods it has sold to an insolvent
debtor if it establishes…
i. That it has a statutory or common law right to reclaim the goods;
ii. That the goods were sold in the ordinary course of the seller’s business;
iii. That the debtor was insolvent at the time the goods were received; and,
iv. That tit made a written demand for reclamation within the statutory time limit
after the debtor received the goods.
b. The reclaiming seller has the burden of establishing each element of §546(c) by a
preponderance of the evidence. The seller seeking reclamation under §546(c) must prove
that it sold the goods in the ordinary course of business and it made a written demand
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c. Pursuant to UCC §2-702(3), the seller’s right to reclamation is subject to the rights
of a good faith purchaser from the buyer.
i. A creditor with a security interest in after-acquired property who acted in good
faith and for value, which includes acquiring rights “as security for or in total or
partial satisfaction of a pre-existing claims, is a good faith purchaser to whose
claim that of a reclaiming seller is subject.
1. The secured creditor with a floating lien remains a good faith purchaser
even if it terminates funding with knowledge that sums are owed to third
parties, as long as the decision concerning the funding was commercially
reasonable.
2. I.e., Article 2 seller loses priority battle to a secured creditor with a perfected security
interest (considered a good faith purchaser)
FIXTURES
1. Note the extra filing requirements for a “fixture filing” in section 9-502(b) on top of the 9-
502(a) requirements.
a. The FS needs to indicate that it covers fixtures.
b. The FS needs to indicate that it is to be filed in the real property records of the state (this
is usually the county recorder of deeds for the location of the real estate).
c. The FS needs to provide a property description of the real estate to which the fixture is
attached.
d. Finally, if the debtor does not have an interest of record in the real estate, the FS needs to
provide the name of the record owner.
2. Recall that 9-501(a)(1)(B) directs that a financing statement filed to evidence a security interest in
a fixture (a “fixture filing”) be made in the county real estate recording office where the fixture is
located.
a. If a secured party takes a security interest in goods that it expects to become fixtures,
prudence dictates that the secured party make dual filings, both a financing statement
sufficient to perfect a security interest in the goods in their nonaffixed form and a fixture
filing in the county in which the real estate is located.
b. Bottom line: File everywhere!
3. Priority of a security interest in goods that are or become fixtures: 9-334. [Probably NOT of
Exam]
a. General Rule: 9-334(c) – A security interest in fixtures is subordinate to a conflicting
interest of a real estate mortgagee or owner (other than the debtor).
b. There are a number of exceptions to this rule that we (may) care about.
i. First in time, 9-344(e)(1)
ii. PMSI, 9-334(d)
1. Exception to exception – construction mortgage, 9-334(h)
iii. Readily Removable goods, 9-334(e)(2)
iv. Lien Creditor, 9-334(e)(3)
v. Manufactured Home, 9-334(e)(4)
vi. Consent, Disclaimer, Right to Remove, 9-334(f)
IRS v. Secured Creditor
1. The federal tax laws encourage the IRS to file a public notice of its lien by providing that the lien
is invalid as against certain interests that arise before the filing of the public notice is made.
a. Protected parties include those holding a “security interest” under federal tax law. For
purposes of federal tax law, a “security interest” is a properly perfected security
interest. Internal Revenue Code 26 U.S.C. § 6323(h)(1)
2. Even if an Article 9 secured party has properly perfected before notice of the federal tax lien is
filed, it will not prevail over the government unless its security interest is choate (“KOH-it”).

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3. A security interest is choate, or “complete” for federal tax law purposes once it is properly
perfected and we can identify the…
a. The identity of the secured party.
b. The amount of the lien; and
c. The property to which it attaches.
4. This is a fairly easy analysis for a properly perfected security interest in present property, but
what about our two problematic friends, the after-acquired clause and the future advances
clause?
a. Can we, with regard to an after-acquired property clause, identify the property
b. Can we, with regard to a future advances clause, identify the amount of the lien?
5. The Tax Lien Act contains two important exceptions to the choatness doctrine.
a. 26 U.S.C. § 6323(c) Provision for After Acquired Collateral.
i. For after-acquired collateral to be prior to an intervening tax lien, the following
elements must be met:
1. A written security agreement exists before the tax lien is filed;
2. The security interest is perfected before the tax lien is filed;
3. The secured party makes the loan in the ordinary course of its business;
4. The debtor acquires the collateral in the ordinary course of business;
5. The loan that is secured by the after-acquired collateral is made before
the 46th day from the tax lien filing; and
6. The debtor acquires the collateral before the 46th day from the tax lien
filing.
ii. *Important Note: If the secured party knows of the tax lien before the 45-day
window, the window closes at the point the secured party obtains that knowledge
(or has notice of the lien). Knowledge = IRS wins.
b. 26 U.S.C. § 6323(d) Provision for Future Advances.
i. A secured party has priority over a filed tax lien as to a future advance made after
the tax lien notice is filed by the IRS if:
1. The security interest is perfected at the time of the tax lien filing;
2. The future advance is made before the 46th day from the tax lien filing;
and
3. The secured party is without actual knowledge of the tax lien when it
makes the advance.
4. The property being sought by both parties is covered by a security
agreement entered into before the tax lien filing; and
5. The debtor owns the property at the time of the tax lien filing.
RIGHTS TO PROCEEDS
1. Perfection in proceeds of collateral continues automatically if the security interest in the original
collateral was perfected by any method - 9-315(c).
a. But it LAPSES on the 21st day after attachment of the security interest to the proceeds
unless one of the conditions in 9-315(d) is satisfied.
i. Those conditions are…
1. The proceeds are identifiable cash proceeds (9-315(d)(2)).
a. Note that this poses problems for the lender. If the proceeds
become commingled with other funds, the secured party may
lose its security interest in them entirely because of an inability
to identify them.
b. Article 9 recognizes this and allows a secure party to use
equitable tracing principles, notably the lowest intermediate-
balance rule, to identify the amount of commingled proceeds to
which its security interest attaches.

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c. Do problems 81 and 82 in Q&A for an example of the Lowest

Intermediate Balance Rule in action.
2. If the proceeds are NOT cash proceeds, then the secured party has to
have perfected its security interest in the original collateral by filing
AND the office in which a financing statement would be filed with
respect to the proceeds is the same as the office in which the secured
party actually field to perfect its security in the original collateral.
(9-315(d)(1)). This is called, not surprisingly, the “same office rule”.
a. It’s a mouthful of a rule, but it happens all the time.
b. E.g., Bank has a perfected-by-filing security interest in
inventory. Borrower generates accounts or chattel paper upon
disposition of the inventory on a regular basis. Because the
Bank would have filed as to the accounts or chattel paper (had
they been the original collateral) in the same office as it filed
with respect to the inventory, perfection does not lapse at the end
of the 20-day grace period. The Bank sleeps well at night,
knowing it has continuous perfection.
i. Why this rule? Predictability.
1. An accounts/chattel paper financier (a factor)
will be on notice to look for inventory financiers
in the borrower’s financing statements since
they will know that inventory can (and does)
generate or convert accounts/chattel paper.
2. The account/chattel paper financier can think
“Wait…I’m going to be junior to the inventory
financier based on the fact that the inventory
will become proceeds in the form of
accounts/chattel paper on which I will be
second-in-time. I better re-negotiate my loan to
the borrower and get a higher interest rate to
compensate me for the added risk of being
subordinated”.
c. Perfection is predicated on the initial financing statement, and
the Bank will become unperfected only if the original financing
statement lapses (9-315(e)).
b. What happens when the proceeds are cash for a brief moment, then used to buy
something else? Does the secured party have a claim in that “something else” as
proceeds?
i. If there is a “cash phase” to the proceeds, perfection in the resulting non-cash
proceeds will lapse at the end of the grace period unless…
1. The secured party originally perfected by filing a financing statement
containing a description broad enough to cover the proceeds, or,
2. Perfection occurs by any appropriate method before the 20 day grace
period expires (i.e., the secured party perfects in the resulting collateral
as if it was the original collateral).
c. Examples of the “cash phase” rule in action:
i. Bank files as to all of Rancher’s “cattle” and Rancher later sells some cattle in
exchange for a check, which Rancher deposits in a bank account.
ii. If Rancher later uses the proceeds in the account to purchase additional cattle, the
Bank’s perfected status will not lapse at the end of the 20-day grace period. The
original financing statement adequately covers the new, non-cash collateral.

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iii. If the Rancher instead bought a tractor with the money in the account, the Bank’s
temporary security interest in the tractor as proceeds of proceeds would lapse.
The financing statement does not cover “equipment”. The Bank would have to
take steps within the 20-day period to perfect in the tractor.
_____________________________________________________________________________________
DEFAULT
1. Definition—default is not defined in the UCC. When the debtor is unable to meet the obligations
set under the security agreement, there is a default. Thus, default is defined by the terms of the
parties’ security agreement.
a. §9-601(c)—the remedies afforded to a secured creditor under Article 9 are cumulative,
meaning that the creditor can choose his or her poison in which way they wish to exercise
their repossession and/or foreclosure rights.
i. These cumulative rights can also be exercised simultaneously.
1. For example, a creditor may conduct an Article 9 foreclosure sale or
repossessed collateral without forfeiting its right to bring a simultaneous
or subsequent in personam action against the debtor.
2. But see Comment 5 to 9-601 for a recognition of non-Article 9
limitations on the simultaneous exercise of remedies (including good
faith).
ii. Three Basic Remedies—(1) retention of the collateral, (2) sale of the collateral,
and (3) an action for the debt.
2. Acceleration—means that all the amounts due under the loan – the amounts borrowed – are due
NOW! The right to “accelerate” a loan often comes hand-in-hand with the claim of a default by
the lender. §1-309. Clauses permitting acceleration of the entire debt on the happening of an
event or “at will” or when the creditor feels “insecure” are permitted if exercised in good faith.
a. Pre-mature acceleration—See Klingbiel v. Commercial Credit Corp.
3. Pre-Default Duties of the Lender
a. “Time is of the essence” Clause
i. The creditor waives right to collect timely by routinely accepting late payments
(§2-208 – waiver on express clause by reliance), but may reinstate the clause
provided there is adequate and fair notice that the creditor is going to insist on
payment on time. §2-209(5).
REPOSSESSION
1. In General—upon default, the creditor may use court proceedings to collect the debt or “self-
help” to repossess the collateral. No notice is required before repossession.
a. Self-Help—§9-609(b) allows a secured creditor to “self-help” as long as it does not
breach the peace.
i. Breach the Peace—a disturbance of public order by an act of violence, or by any
act likely to produce violence, or which by causing consternation/protest and
alarm, disturbs the peace and quiet of the community. See Hilliman v. Cobado.
1. The duty to not breach the peace is nondelegable and not transferable
(i.e., a secured creditor is responsible for the acts of an independent
contractor hired to repossess the collateral when the IC breaches the
peace), See Williamson v. Fowler Toyota.
2. Once the peace has been breached, the creditor should retreat, but may
return later to try and repossess.
3. CANNOT BE WAIVED, §9-602(6).
b. Non-collateral in repossession—if there are non-collateral items in the car that is
repossessed, what happens? No clear answer. Reasonableness still comes into play.

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FORECLOSURE SALES
1. Introduction—once a secured party has declared a default (and possibly accelerated the loan
balance), the secured party can repossess the collateral in a peaceable manner. Upon
repossession, the secured party can elect to foreclose on the collateral, meaning that it can force a
sale of the collateral through “commercially reasonable means.”
2. §9-610
a. After default, as secured party may sell, lease, license, or otherwise dispose of any or all
of the collateral in its present condition or following any commercially reasonable
preparation or processing.
b. Every aspect of a disposition of collateral, including the method, manner, time, place, and
other terms, must be commercially reasonable. If commercially reasonable, a secured
party may dispose of collateral by public or private proceeding, by one or more contracts,
as a unit or in parcels, and at any time and place and on any terms.
3. What is “commercially reasonable” in a UCC foreclosure sale?
a. §9-627(a)—the fact that a greater amount could have been obtained by a collection,
enforcement, disposition, or acceptance at a different time or in a different method from
that selected by the secured party is not of itself sufficient to preclude the secured party
from establishing that the collection, enforcement, disposition, or acceptance was made in
a commercially reasonable manner.
i. The price obtained by the foreclosure sale, by itself, is not a per se indication that
the sale was done in a commercially unreasonable manner (creates a basis for
second-guessing the secured party’s procedures).
b. §9-627(b)—a sale of collateral is made in a commercially reasonable manner if the
disposition is made:
i. in the usual manner on any recognized market (e.g., a stock exchange);
ii. at the price current in any recognized market at the time of the disposition; or,
iii. otherwise in conformity with reasonable commercial practices among dealers in
the type of property that was subject of the disposition.
iv. Note—Comment 3 to 9-627: “[N]one of the specific methods of disposition
specified in subsection (b) is required or excusive.”
c. §9-627(c)—a sale of collateral is made in a commercially reasonable manner if it has
been blessed by a . . .
i. Court;
ii. Bona fide creditors’ committee;
iii. A representative of creditors; or,
iv. An assignee for the benefit of the creditors.
d. In the eye of the beholder, but some factors come into play
i. Publication—did you create enough of a market for the collateral?
ii. Notice—was proper notice given to required parties (and maybe even to some
non-required parties) to give them enough time to act?
iii. Sale has to occur within a reasonable time
iv. Public v. Private Sales
e. R&J of Tennessee v. Blankenship-Melton Factors
i. The type of collateral involved;
ii. The condition of the collateral;
iii. The number of bids solicited;
iv. The time and place of sale;
1. If s secured party holds collateral for a long period of time without
disposing of it, and if there is no good reason for not making a prompt
disposition, the secured party may be determined not to have acted in a
commercially reasonable manner.

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v. The purchase price received or the terms of the sale;

vi. Any special circumstances involved;
vii. Use of the collateral (any wear and tear);
viii. Valuation of the collateral (try to get an appraiser).
4. Notice—notice to persons who have an interest in the collateral is important. It allows interested
parties to review the sale process, perhaps redeem the collateral (i.e., pay the secured party the
amount of the obligation owed to it and obtain the collateral) or it can allow such person to seek
an injunction against the sale if there is a valid reason to challenge the secured party’s lien or sale
process. (Without notice, none of these safeguards are possible).
a. Who is entitled to notice of a foreclosure sale?
i. 9-611(c)(1) and (2) tells us that the secured party needs to provide notice to the
“debtor” and any “secondary obligor”
1. Debtor—person having an interest, other than a security interest or other
lien, in the collateral, whether or not the person is an “obligor.” 9-
102(a)(28)(A).
a. Obligor—the person who owes payment or other performance of
the obligation being secured. 9-102(a)(59).
2. Secondary Obligor—a person that is essentially a surety for the secured
obligation.
ii. 9-611 requires a secured party to notify the person who supplied the collateral
(the debtor) and any surety for the debtor (the secondary obligor), but it does not
require the secured party to notify the primary obligor unless that person is also a
debtor (which most of the time, he/she/it is).
iii. 9-611(c)(3)(B)—notify other secured party or lienholder, as of ten days prior to
the date of the notice, holds an interest in the same collateral that is perfected by
filing or by notation on a certificate of title.
iv. 9-611(c)(3)(A)—notice to any secured party or lienholder that has previously
advised the foreclosing party (such as the holder of a judgment lien), by an
authenticated notification, that it claims an interest in the collateral
v. The government/IRS, 25 days prior to sale
b. How much notice should be given?
i. 9-611(b) requires that a secured party send a “reasonable authenticated
notification” of disposition.
ii. 9-612(b) provides a baseline of 10 days notice.
c. What should the notice say?
i. Look at 9-613 for content requirements and 9-614 for forms.
1. 9-614 form is for a consumer transaction and has the additional
requirements needed for providing notice in a consumer context…
a. description of any liability that the recipient may have for a
deficiency
b. telephone number to get information regarding amounts needed
for redemption and to obtain more information about the
disposition of the collateral and the obligation secured.
d. Can notice be waived by a debtor or secondary obligor?
i. Only by an agreement to that effect entered into and authenticated after default.
§2-209.
5. Who can bid on Article 9 foreclosure sales?
a. 9-610(c)—Secured parties are allowed to bid at either a . . .
i. Public dispositions; or,
ii. Private disposition only if the collateral is of a kind that is customarily sold on a
recognized market or the subject of widely distribute standard price quotations.

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1. Stock, commodities, things that have a recognized market. Pieces of

famous artwork, probably not.
6. Rebuttable Presumption Rule—if the secured party conducts a commercially unreasonable sale,
a presumption is created that the debtor is damaged to the extent of the deficiency claim. The
secured party’s ability to get a deficiency from the debtor is at risk, but not totally gone.
a. The presumption shifts to the secured party the burden of proving what amount could
have been obtained for the collateral if the sale was done in a commercially reasonable
manner.
b. If the secured party presents evidence sufficient to rebut the presumption, the secured
party is entitled to the deficiency based on what amount could have been brought in
through a commercially reasonable sale.
c. I.e., had I done it correctly, I would have received $X, which still leaves a deficiency and
I am entitled to that deficiency.
7. Calculating the deficiency/surplus
a. 9-615(f) provides another calculation rule on top of the rebuttable presumption rule.
i. If the secured party is the buyer in the foreclosure sale, AND the amount of
proceeds of the sale is significantly below the range of proceeds that a complying
sale to a person other than the secured party.
1. Then the deficiency is calculated based on the amount of proceeds that
would have been realized in a complying sale to a buyer other than the
secured party (and not the actual proceeds obtained).
a. This also applies when the sale is to someone related to a secured
party or a secondary obligor.
8. Application of Proceeds
a. §9-608(a) and 9-615(a) provide the priority (or “waterfall”) for any proceeds obtained
from collection made by the secured party (per 9-607) or from a foreclosure sale (9-610).
i. To the secured party for reasonable expenses incurred to repossess and dispose
of the collateral (and attorney’s fees if they are allowed under the loan and/or
security agreement and under local law);
ii. To the obligations owed by the obligor;
iii. To any junior secured parties or junior lienholders that have provided the
foreclosing secured party with a timely demand for payment;
1. Senior lienholder is not entitled to proceeds from a distribution under
either waterfall (see Comment 5 to 9-608).
iv. To the obligor/debtor for any surplus.
9. Rights of a Transferee
a. §9-617—a secured party’s disposition of collateral after default…
i. Transfers to a transferee for value all of the debtor’s rights in the collateral;
ii. Discharges the security interest under which the disposition is made; and,
iii. Discharges any subordinate security interest or other subordinate lien (other
than liens created by whatever hometown industry or special interest statutory
lien law that state has in place).
STRICT FORECLOSURE AND REDEMPTION
1. Strict Foreclosure—after repossession, the creditor may elect to keep the goods in full or partial
satisfaction of the debt. §§9-620-622.
a. Begins with a proposal—defined as “a record authenticated by a security party which
includes the terms on which the secured party is willing to accept collateral in full or
partial satisfaction of the obligation it secures.” 9-102(a)(66).
b. General Notice Requirement—a creditor electing strict foreclosure must send an
authenticated notice to the debtor and other creditors with interests in the collateral who

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have sent an authenticated notice of their interests to the repossessing creditor or who
have filed a financing statement. 9-621(a).
i. Those notified have 20 days in which to object and force the creditor to sell the
collateral. 9-620(d)(1).
c. 9-620(e) and (f)—Consumer Good Exception—where the collateral is consumer goods
and the debtor has repaid at least 60% of the principal debt, the creditor must resell the
collateral within 90 days of repossession (or within a longer period agreed to by the
debtor) and turn over any excess to the debtor.
i. This debtor’s right to resale may be waived only after default.
d. Strict foreclosure in partial satisfaction of the debt—a creditor wishing to retain
collateral in partial satisfaction of the debt must also acquire the debtor’s consent in an
authenticated record.
i. This remedy is only available for collateral that is not consumer goods.
e. No such thing as a constructive strict foreclosure (see Comment 5 to 9-620).
2. §9-623 Redemption—prior to resale, the debtor may redeem the collateral by tendering the debt
owed at the time of redemption plus expenses of repossession.
a. No waiver prior to default—a debtor cannot waive the right of redemption prior to
default.
b. No redemption after any of the following events . . .
i. Secured party has collected the collateral under 9-607.
ii. A secured party has sold collateral or entered into a contract for its sale under 9-
610; or,
iii. Secured party has accepted in full or partial satisfaction of the obligation per 9-
622.
c. Who can deem?
i. A debtor; a secondary obligor (surety); or, any other secured party/lienholder. 9-
623(a).
d. 9-623(b)—in order to redeem collateral, the redeemer must …
i. Fulfill all obligations secured by the collateral; and,
ii. Reasonable expenses and attorney’s fees (of allowed by the contract and state
law) of the secured party.
LIABILITY OF A BANK FOR SCREWING UP THE FORECLOSURE SALE—There are many ways
that a secured party can screw up.
1. Pre-Disposition Remedies
a. §9-625(a)—if it is established that a secured party is not proceeding in accordance with
this article, a court may order or restrain collection, enforcement, or disposition of
collateral on appropriate terms and conditions.
i. Essentially, this is a grant of an injunction against the secured party (need
irreparable harm).
ii. Also, putting the debtor in their rightful position.
2. Post-Disposition Remedies
a. §9-625(b)—a person is laible for damages in the amount of any loss caused by a failure
to comply with this article. Loss caused by a failure to comply may include loss resulting
from the debtor’s inability to obtain, or increased costs of, alternative financing.
i. Note—this is not limited to failures in foreclosure sales; it also applies to not
filing termination statements, screwing up financing statements, etc.
b. DOES NOT displace the injured party’s remedies under tort law.
i. Examples—trespass to chattel, conversion (look to FMV)
c. Can also seek punitive damages
3. Consumer Penalty
a. §9-625(c)—adds certain penalties to consumer transactions

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_____________________________________________________________________________________

BANKRUPTCY
1. All federal bankruptcy laws are found in Title 11 of the United States Code
a. Different Chapters
i. Chapter 1, 3, 5—Administration of bankruptcy estate
ii. Chapter 7—Liquidation (or “I give up, sell my stuff”)
iii. Chapter 11—Corporate (and sometimes individuals) reorganization (or “let’s try
a new plan”)
iv. Chapter 13—Individual reorganization (or “can we work this out over three
years”)
v. Other Notables
1. Chapter 9—municipal reorganization
2. Chapter 12—reorganization of farmer or farming business
3. Chapter 15—recognition of a foreign bankruptcy case.
2. Important Bankruptcy Provisions
a. Automatic Stay, 11 USC 362—a petition filed under this title operates as a stay. There
is an automatic stay so creditors are stopped from all trying to grab something. Ways to
modify the automatic stay, see 11 USC 362(d).
i. Applies to all collection and enforcement actions, including foreclosure
proceedings, cash sweeps, lawsuits, etc.
1. Knowledge of the stay is not required.
2. Willful violations of the stay by creditor after notice, call for (punitive)
damages.
3. Inadvertent violation, call for an “undoing” of the action.
b. Lifting the Stay—creditor can seek a lifting of the stay
i. Standards, 11 USC 362(d)(1) [creditor must file a motion, burden of proof on the
creditor]
1. For cause; or
a. Meaning the debtor is destroying the collateral or using it in such
a way that it can quickly depreciate in value.
2. The debtor does not have equity in the collateral AND the collateral is
not necessary for an effective reorganization (obviously does not apply
to Chapter 7).
a. Lack of equity means a valuation fight.
ii. Creditor seeking relief must file a motion. The burden of proof is on the creditor
to show that either “cause” exists to lift the stay, or that the debtor lack equity.
c. Powers of the Trustee, 11 USC 544
i. The trustee as hypothetical judicial lien holder.
1. Trustee shall have the rights and power of, or may avoid any transfer of
property of the debtor or any obligation incurred by the debtor that is
voidable by a creditor that extends credit to the debtor and that obtains a
judicial lien on all property on which a creditor could have obtained a
judicial lien.
ii. Why is this important?
1. A security interest in subordinate to the right of a person that becomes a
lien creditor before the earlier of the time:
a. The security interest is perfected; or,
b. One of the conditions specified in §203 is met and a financing
statement covering the collateral is filed.

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iii. §9-317 provides that a lien creditor takes priority over an unperfected security
interest. Therefore, the trustee can assert its status as a lien creditor under state
law to avoid unperfected security interest.
d. Preferences, 11 U.S.C. 547(b)—The trustee may avoid any transfer of an interest of the
debtor in property
i. To or for the benefit of a creditor;
ii. For or on account of an antecedent debt owed by the debtor before such transfer
was made (i.e., on behalf of a debt);
iii. Made while the debtor was insolvent (debtor is broke);
1. Insolvency presumed.
iv. Made on or within 90 days BEFORE the date of the filing of the petition; or,
v. Between 90 days and one year BEFORE the date of the filing of the petition, if
such creditor at the time of such transfer was an insider (basically someone
related to the debtor); and
vi. That enables such creditor to receive more than such creditor would receive if-
1. The case were a case under chapter 7 of this title;
2. The transfer had not been made;
3. Such creditor receive payment of such debt to the extent provide by the
provisions of this title.
vii. What does it mean?
1. It means that you look at the period 9 days prior to the petition or filing
date and look for any transfers of the debtor’s property that were made to
creditors.
2. Those transfers, if they were made while the debtor was insolvent, on
account of an antecedent debtor, and provided the creditor with more
than it would have gotten in a Chapter 7 liquidation, are preferential.
3. Defenses—defenses for the creditor who has been charged with receiving a preference:
a. Payments were made in a Contemporaneous Exchange, 11 USC 547(c)(1)
b. Payments were made in the Ordinary Course of Business, 11 USC 547(c)(2)
i. Look at prior payments to see if trustee’s power to avoid is negated.
c. New value was provided to the debtor after the allegedly preferential payment, 11
USC 547(c)(4) (if at the end of the transfer history, the creditor provides something that
the debtor does not repay, may offset that amount against preferential liability)
i. Allows you to offset the new value against the preference liability.
4. Fraudulent Transfers, 11 USC 548—the trustee may avoid (undo) any transfer of an interest of
the debtor in property (i.e. a security interest) or any obligation incurred by the debtor that was
made or incurred on or within 2 years BEFORE the date of the filing of the petition, if the debtor,
a. Made such transfer with actual intent to hinder, delay, or defraud any entity; or,
b. Received less than a reasonably equivalent value in exchange for such transfer and . . .
i. Was in solvent on the date of such transfer; or,
ii. Was engaged in a business or transaction for which any property remaining with
the debtor was an unreasonably small capital; or,
iii. Intended to incur debts that would be beyond the debtor’s ability to pay as such
debts matured.
Breakdown of Code Provisions
1. 9-600s—Default and Foreclosure
2. 9-500s—Filing Requirements
3. 9-400s—stuff you don’t care about
4. 9-300s—Perfection and Priority
5. 9-200s—Attachment and Some Other Stuff
6. 9-100s—Definitions and Scope

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FEDERAL INCOME TAXATION

Professor Gina Torielli, Michaelmas Term 2011

INTRODUCTION
1. Constitutional Authority
a. Article 1, §8, clause 1—“power to lay and collect taxes, duties, imposts, and excises . . .
All duties, imposts, and excises shall be uniform throughout the United States.”
b. Article 1, §2, clause 3; §9, clause 4
i. “Direct” taxes must be apportioned among the several states in accordance with
their respective populations.
1. This became a problem because if it is not based on population, it cannot
be uniform. To fix this, Congress passed the 16th Amendment, which
removed the population requirement.
c. 16th Amendment—“Congress shall have the power to lay and collect taxes on incomes,
from whatever source derived, without apportionment among the several states and
without regard to any census or enumeration.”
i. The 16th Amendment voids Article 1, §2, cl.3; §9, cl.4.
ii. The source of congressional power to tax is now vested in the 16th Amendment.
2. Other Sources of Authority
a. Internal Revenue Code (IRC; sometimes referred to as the “Code”)
i. The Code is binding on courts, taxpayers, and the government. Courts can of
course interpret the Code broadly or narrowly.
ii. The Code covers income taxes, estate and gift taxes, employment taxes, alcohol,
tobacco, and procedure and administration of the Internal Revenue Service and
the U.S. Tax Court.
iii. Subtitle A: Covers income taxes, including individual and corporate income
taxes – we will focus on individual taxes.
b. Treasury Regulations
i. Part of the Code of Federal Regulations (CFR) promulgated by the Department
of Treasury. (Published in Title 26 of the CFR §1.0-1 et seq.)
ii. A court MAY invalidate a Treasury Regulation if it contradicts the plain meaning
of the Code. However, this occurs very rarely, and the courts generally give
great deference to Treasury Regulations.
c. Revenue Rulings
i. The National Officer of the IRS publishes official interpretations of the IRC
(called Revenue Rulings) for the information and guidance of taxpayers and their
representatives.
ii. Revenue Rulings have less precedential value than Treasury Regulations.
iii. Courts are NOT bound to follow Revenue Rulings and may rule that a Revenue
Ruling is not consistent with the IRC. Generally, however, the courts find
Revenue Rulings quite persuasive and give them deference.
iv. Taxpayers are entitled to rely on a Revenue Ruling to the extent that the facts and
circumstances concerning the taxpayer’s situation are substantially the same as
those set out in the Revenue Ruling.
v. These deal with substantive tax issues.
d. Revenue Procedure
i. An official statement of the IRS on a procedural matter affecting the rights and
duties of taxpayers; it’s like a Revenue Ruling, but it is on procedural terms, i.e.
like what date you have to file taxes.
ii. Issued to promote the IRS’s uniform application of the tax laws.

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3. Six Main Issues in Federal Income Tax

a. What items of economic income or gain will be includable in gross income?
Includable means that you have to pay taxes on them.
b. What items of expense will be allowable as deductions? A deduction is the number
that you subtract from gross income to get a new income (the important number)—a
write-off or deduction reduces the amount of taxes you have to pay
c. What is the character of the items of income or the deductions? Ordinary income
versus capital gains; capital gain (long-term) is very favorable because the maximum rate
is 15% as opposed to 35%.
d. When is gain or loss recognized?
e. When is an amount included in income or deductible?
f. Who is going to be taxed on items of income?
_____________________________________________________________________________________
GROSS INCOME: CONCEPTS AND LIMITATIONS
1. Gross Income Defined, Section 61 of the IRC:
a. General Definition—Except as otherwise provided in this subtitle, gross income means
all income realized from whatever source derived, including (but not limited to) the
following items:
i. Compensations for services, including fees, commissions, fringe benefits, and
similar items;
ii. Gross income derived from business;
iii. Gains derived from dealings in property;
iv. Interest;
v. Rents (see also Treas. Reg §1.61-8(a));
vi. Royalties (see also Treas. Reg. §1.61-8(a));
vii. Dividends (see also Treas. Reg. §1.61-9(a));
viii. Alimony and separate maintenance payments;
ix. Annuities;
x. Income from life insurance and endowment payments;
xi. Pensions (see also Treas. Reg. §1.61-11(a));
xii. Income from discharge of indebtedness;
xiii. Distributive share of partnership gross income (not in this class);
xiv. Income in respect of a decedent (not in this class); and,
xv. Income from an interest in an estate or trust (not in this class).
b. Everything is Income UNLESS otherwise stated—gross income is everything, no
matter what the source may be.
c. Adjusted Gross Income = gross income – above-the-line deductions
2. Accessions to Wealth—An “Accession to Wealth” means that there is an increase in your net
worth. Add up the value of your assets and subtract your debts.
a. Anytime you have an accession to wealth AND you have complete control over it, you
have gross income UNLESS you can find a specific exception in the IRC.
b. Commissioner v. Glenshaw Glass Co. (1955) (defining gross income as “instances of
undeniable accessions to wealth, clearly realized, and over which the taxpayer had
complete dominion (or control).”)
c. Cesarini v. U.S. (1969): clear control of the accession, including treasure troves, counts
toward gross income.
3. Gross Income—Treasury Regulations (Treas. Reg. §1.61.1(a))
a. “Gross income means all income from whatever source derived, unless excluded by
law. Gross income includes income realized in any form, whether in money,
property, or services. Income may be realized, therefore, in the form of services,

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meals, accommodations, stock, or other property, as well as in cash. Section 61 lists

the more common items of gross income for purposes of illustration. For purposes of
further illustration, §1.61-14 mentions several miscellaneous items of gross income not
listed specifically in section 61. Gross income, however, is not limited to the items so
enumerated.”
4. Miscellaneous Items of Gross Income (Treas. Reg. §1.61-14(a))
a. In addition to the items enumerated in section 61(a), there are many other kinds of
income. For example, punitive damages such as treble damages under the antitrust laws
and exemplary damages for fraud are gross income [Glenshaw Glass]. Another
person’s payment of the taxpayer’s income taxes constitutes gross income to the
taxpayer unless excluded by law [Old Colony Trust Co.]. Illegal gains constitute gross
income. Treasure trove, to the extent of its value in United States currency, constitutes
gross income for the taxable year in which it is reduced to undisputed possession
[Cesarini].
5. Discharge of Obligation to a Third Party
a. Discharge of an obligation will likely not be a gift if that discharge arises out of an
employer-employee relationship and is considered to be a discharge made in connection
with the performance of services. See Old Colony Trust Company v. Commissioner.
6. Wages and Commissions (Treas. Reg. §1.61-2(a)(1))—Wages and commissions are the most
common source of income for us.
a. “Wages, salaries, commissions paid salesmen, compensation for services on the basis of
a percentage of profits, commissions on insurance premiums, tips, bonuses, (including
Christmas bonuses), termination or severance pay, rewards, jury fees, marriage fees and
other contributions, received by a clergymen for services, pay of persons in the military
or naval forces of the United States, retired pay of employees, pensions, and retirement
allowances are income to the recipients UNLESS otherwise excluded by law.”
b. General Rule—If you perform services and you receive cash (including checks) as
consideration, whether you call it wages, commissions, bonuses, etc., you have gross
income equal to the cash you received UNLESS there is a specific exclusion under the
Code.
7. Tips
a. Tips are NOT gifts. A gift is something that is given to you under detached and
disinterested generosity. People give tips for good service; therefore it is compensation
and is includable like compensation.
b. Treas. Reg. §1.61-2(a) specifically provides that tips constitute gross income.
Typically, those receiving tips expect to be tipped for the services they render. Thus,
there is an element of compulsion associated with tips. As such, tips are not gifts.
8. Compensation Paid Other Than in Cash
a. “[I]f services are paid for in property, the fair market value4 of the property taken in
payment must be included in income as compensation. If services are paid for in
exchange for other services, the fair market value of such other services taken in payment
must be included in income as compensation. If services are rendered at a stipulated
price, such price will be presumed to be the fair market value of the compensation
received in the absence of evidence to the contrary.” Treas. Reg. §1.61-2(d)(1).
i. When a company rewards an employee for exceptional performance, then clearly
the employee has received some benefit. This is like a bonus or compensation

4
The price a willing buyer would pay a willing seller, with neither under a compulsion to buy or sell, and both
having reasonable knowledge of relevant facts. Treas. Reg. §20.2031-1(b).

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for being a good performer and is therefore includible in gross income; fair
market value of the trip. See McCann v. U.S.
9. Compensating an Employee with Property
a. “[I]f property is transferred by an employer to an employee or if property is transferred to
an independent contractor, as compensation for services, for an amount less than its fair
market value, then regardless of whether the transfer is in the form of a sale or exchange,
the difference between the amount paid for the property and the amount of its fair
market value at the time of transfer is compensation and shall be included in the
gross income of the employee or independent contractor.” Treas. Reg. §1.61-2(d)(2).
i. The government is worried about bargain sales here between the employer and
the employee. Between employer-employee, the difference of what you pay
and the fair market value is compensation.
b. Hypo: You work for a car company. The company allows you to buy a $30,000 car for
$1,000 rather than just giving it to you. You have a $29,000 accession to wealth, which
is compensation that is includible in gross income.
10. Barter Exchanges
a. Rev. Rul. 79-24:
i. Hypo: Lawyer provided legal services to a plumber, who in return provided
plumbing services to the lawyer.
ii. Hypo: Landlord received art work from an artist. In exchange the landlord
provided the artist with six months rent free use of an apartment.
iii. Treas. Reg. §1.61-2(d)(1), discussed in a prior slide, provides that if services are
paid for other than in money, the fair market value of the property or services
taken in payment must be included in gross income. If the services were
rendered at a stipulated price, such price will be presumed to be the fair
market value in the absence of evidence to the contrary.
iv. The IRS says that when you have a barter exchange, the fair market value of the
property or services is included in your gross income. If it is at a stipulated price,
it goes back to the fair market value.
v. What result to the lawyer, plumber, landlord, and artist?
1. The fair market value of the services received by the lawyer and the
plumber are includable in their gross incomes under Section 61 of the
Code.
2. The fair market value of the work of art and the six months fair rental
value of the apartment are includable in the gross incomes of the
apartment-owner and the artist under Section 61 of the Code.
11. Imputed Income
a. Suppose that once you pass the bar, you start your own business. Typically, a new
business owner would pay $1,500 to an attorney to assist him or her with the formation of
a corporation. Because you’re a lawyer, you do all the legal work yourself. Do you
have gross income equal to the value of the legal services you saved?
i. We DO NOT tax imputed income and it is not includable in gross income. If
you do all of the legal work for yourself to start your firm and you save
money from hiring someone else, “sweat equity” is not gross income to you
12. Bargain Purchases
a. General Rule—the purchase of property for less than its value does not, of itself, give
rise to the realization of taxable income.
i. If the original buyer subsequently sales or exchanges the item at a higher price,
then the difference would be accounted for in gross income (FMV minus Bargain
Purchase = gross income)

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b. What if Marcella got the bargain purchase on E-bay rather than from her
employer? The difference between the purchase price and the fair value is not gross
income right away. You have a $100 basis in this item and if you resell it for $500, you
have to include the gain (when you sell or exchange it) = $500 - $100 = $400. This is
assuming the purchase is truly arm’s length.
13. Realization
a. When does realization occur?
i. A taxpayer does NOT include the appreciation (i.e. the difference between the
fair market value of the property and the price you paid for it, i.e. basis, which
we’ll discuss later) of property in gross income, so long as the taxpayer
continues to own it (with some very minor exceptions that are far beyond the
scope of this class).
ii. A taxpayer takes the appreciation into account when he or she sells or
exchanges the property (with some exceptions which we’ll discuss later). In
other words, the taxpayer has not “realized” a gain, until sale or exchange.
b. Why do we adopt the “realization” requirement?
i. Measuring the appreciation in all of the property of every taxpayer every year
would present enormous administrative problems for taxpayers and the IRS.
ii. The taxpayer may not have cash to pay the taxes on the appreciation, in which
case the taxpayer would be forced to sell assets to raise cash to pay the tax.

THE EFFECT OF AN OBLIGATION TO REPAY

1. Loans
a. Loans are NOT includible in gross income.
i. Why are loans not includible in gross income? Because they are not an accession
to wealth; they do not increase the taxpayer’s net worth because the loan
proceeds are accompanied by an equal and offsetting liability – the borrower has
the obligation to repay the loan.
ii. There is no Code provision or Treasury Regulation that specifically excludes
loans from gross income, but the rule is clear and absolute.
iii. A loan is an unconditional obligation to repay.
b. What would happen if you don’t have to pay the loan back; i.e. the bank writes off
the debt?
i. At that time, you have an accession to wealth. This is called a discharge of debt.
2. Claim of Right Doctrine—stands for the proposition that a taxpayer acquires earnings whether it
is lawful or unlawful. The taxpayer has to include that amount in gross income immediately even
though the taxpayer may have to pay that money back. If the taxpayer pays the money back, he
can get a deduction. Claim of right is a conditional obligation to repay.
a. Contingent Repayment Option—money or property received under a claim of right,
without restriction as to its disposition, is gross income, even if the taxpayer is ultimately
required to return such money or property to its rightful owner.
3. Illegal Income
a. An illegal income IS includible in gross income; it is an accession to wealth.
i. If a taxpayer tries to argue that reporting the illegal income is a violation of his
fifth amendment (incriminating oneself), such argument will fail.
b. Embezzled funds ARE includible in gross income and repayment would result in a
deduction.
i. If you embezzle money, you have an unconditional obligation to repay that
money. Because of that unconditional obligation, the embezzler might argue that
it was a loan and therefore not includible in gross income. Per James v. United
States, embezzled monies are not loans. They are to be included in gross income

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in the year in which the funds or other property are misappropriated. Whether
the transfer of legal title occurs or not, the individual has increased his or her
wealth. Loans are distinguishable since they must be repaid over a certain
period; misappropriated funds might never be detected and recovered. In this
case, James (D) gained control over the embezzled funds. Thus, in the applicable
years, he should have reported this income on his taxes.
4. Advance Payments and Security Deposits
a. Advance Payments—advance payments are immediately includible in income.
i. If a landlord receives 3 years of rent upfront, all three years of it generally
constitute gross income in the year it is received regardless of the period covered
(or the taxpayer’s method of accounting). Reg. §1.61-8(b).
b. Security Deposits—security deposits are not immediately includible in income.
i. Security deposits are tantamount to a loan situation because the landlord may
have to pay that amount back; it is not earned yet. Security deposits are more
like a loan because the taxpayer does not have complete dominion over it; the
taxpayer may have to return it.
c. Test—Security Deposit OR Advance Payment? Who ultimately has control over the
disposition of that money? If the customer still has ultimate control over the money, it is
a security deposit rather than an advance payment. Commissioner v. Indianapolis Power
and Light Company.

GAINS DERIVED FROM DEALINGS IN PROPERTY

1. Section 61(3)—gains derived from dealings in property.
a. You do not have gains from dealings in property UNTIL you realize that gain. You must
have a realization event in order to have gains
2. Realization Review
a. The taxpayer “realizes” no income so long as he or she owns the property.
b. The sale or exchange of the property, however, is a realization event.
3. Gain
a. Treasury Regulation 1.61-6(a)—gain is the excess of the amount realized over the
unrecovered cost/adjusted basis for the property sold OR exchanged.
i. Gain = Amount Realized – Adjusted Basis
b. IRC Section 1001 – Computation of Gain or Loss
i. You have a gain/loss realized upon the sale or exchange of the property.
ii. Gain/loss = amount realized – adjusted basis. If you get a positive number, it is a
gain (and vice versa).
4. Amount Realized, Basis, and Adjusted Basis
a. Amount Realized:
i. Section 1001(b): Amount realized from the sale or other disposition of property
shall be the sum of any money received plus the fair market value of the
property (other than money) received.
ii. Example: If you sell your stock for $1,000,000, your amount realized is
$1,000,000. If you exchange something for $200, your amount realized is $200.
b. Basis:
i. Section 1012: The basis of property shall be the cost of such property, except
as otherwise provided.
ii. In other words, it is your original cost; this is easy to figure out if you pay
cash. However, if you receive property as compensation, your basis is the FMV
of that property.

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c. Adjusted Basis:
i. Section 1011: The adjusted basis for determining the gain or loss from the sale
or other disposition of property, whenever acquired, shall be the basis, adjusted
as provided in section 1016.
ii. In other words: Adjusted Basis = the cost of the property sold or exchanged
reflecting any recovery of his/her investment or any additional investment
made in the property. It’s the basis with adjustments.
iii. Example 1: Jackie purchases a home for $150,000 and subsequently added a
room to the home at a cost of $25,000. What is Jackie’s adjusted basis?
1. She needs to adjust her basis positive.
2. Adjusted Basis = the cost of the property reflecting adjustments. Here
the adjusted basis is $150,000 + 25,000 = $175,000.
iv. Example 2: Assume the same facts as Example 1, but a small greenhouse
attached to the house was completely destroyed in a hailstorm and Jackie
recovered $10,000 from her insurance company for the destruction of the
greenhouse. Instead of investing the $10,000 in repairing the greenhouse, she
used the $10,000 to take a cruise. What is Jackie’s adjusted basis?
1. She must adjust her basis downward.
2. $175,000 – 10,000 = $165,000.
5. Impact of Liabilities
a. Two Ways You Can Borrow Money
i. Recourse Debt—a debt is a recourse if the lender may look to the debtor to
personally satisfy the debt; in other words, the lender can come after you
personally and make you repay it.
1. Student loans are recourse loans. Most loans are recourse.
ii. Non-Recourse Debt—a debt is non-recourse if the lender may only look to the
security given to satisfy the debt
1. Typically comes up in real estate transactions. They cannot come after
you individually but they can foreclose on your property. The lender
gets whatever collateral you put up.
b. Example 1: Julie purchases a tract of unimproved land from Paul for $100,000 and
borrows the $100,000 from the bank. Assume that Julie gives the bank a recourse
promissory note for $100,000 secured by a mortgage on the land. What is Julie’s basis
(cost) in the land?
i. Basis/Cost: $100,000. We assume that she will eventually pay it.
ii. Would it make a difference if the seller was also the lender, e.g. a land
contract?
1. No, Julie’s basis in the property is still $100,000.
iii. Would it make a difference if the note was non-recourse?
1. No, both types of debt should be accorded the same treatment.
c. Problem: Clare, a professional artist, owes Liz $10,000 in legal fees. Liz has agreed to
accept one of Clare’s paintings as partial payment on Clare’s account. Clare would
normally sell a painting of the size and quality selected by Liz for between $5,000 to
$6,000. Clare and Liz agree that the painting should be valued at $5,500 for purposes of
satisfying a portion of the fees owed by Clare to Liz. Clare’s account balance is therefore
reduced to $4,500. Five years later when Clare’s painting has significantly increased in
value, Liz sells the painting for $10,000. What are the tax consequences to Liz of the
receipt and eventual sale of the painting?
i. Steps to Coming up with the Answer:
1. Step 1 (barter exchange): How much, if any, must Liz report in gross
income upon the exchange?

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a. When you have a barter exchange, you have to include the

fair market value of what you’ve received in the barter.
i. $5,500 is how much Liz must report in gross income.
2. Step 2: What basis does Liz take in the painting?
a. $5,500 basis
3. Step 3: What is the amount realized?
a. $10,000
4. Step 4: What gain if any must Liz recognize? When?
a. Amount realized – adjusted basis = gain.
b. $10,000 - $5,500 = $4,500. Realization and recognition will be
at the same time, which is the time of sale.
ii. What are the tax consequences to Clare, assuming that Clare had invested
$100 in the materials used in creating the painting and 25 hours of her time?
1. What is Clare’s amount realized?
a. Clare’s amount realized is $5,500. In the barter exchange, she
got $5,500 of her debt taken off for legal services.
2. What is Clare’s adjusted basis in the painting?
a. Is the $100 spent on materials included in “cost?”
i. Yes, this is part of the cost of the painting.
b. Is the value of Clare’s labor included in her “cost?”
i. No, because there is no imputed value and quite frankly
if we say she has a cost in her own labor then how would
anyone pay taxes in their own labor. If you included the
value of their labor, how would they ever pay taxes?
There is no basis in YOUR time.
c. What did we learn last week about imputed income?
3. What is Clare’s gain, if any?
a. Amount realized ($5,500 of legal services) – basis of materials
($100) = $5,400.
6. Discharge and Assumption of Liabilities
a. Treas. Reg. §1.1001-2. Discharge of Liabilities
i. Inclusion in amount realized.
1. (1) In general . . . the amount realized from a sale or other disposition of
property includes the amount of liabilities from which the transferor is
discharged as a result of the sale or disposition.
a. So, if you have property subject to $100K debt and you sell it for
the assumption of $100K plus $200K in cash, the assumption is
party of the amount realized. The amount you would realize is
$300K.
2. (3) Liability incurred on acquisition. In the case of a liability incurred by
reason of the acquisition of property, this section does not apply to the
extent that such liability was not taken into account in determining the
transferor’s basis for such property.
b. Hypothetical: You own a parcel of land with an adjusted basis of $150,000. The
land is worth $200,000 and is subject to a mortgage of $100,000. Assume you sell
your land to Andy. In return, Andy pays you $100,000 cash and assumes your
$100,000 mortgage (assume also that the lender agrees to look solely to Andy to pay
the mortgage).
i. What is your amount realized?
1. You’ve received $100,000 in cash PLUS you’ve been relieved of
$100,000 of the mortgage, so your amount realized = $200,000.

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ii. What is your gain?

1. To figure out gain, you need to know adjusted basis. Per the facts, that is
$150,000. Take $200,000 - $150,000 = $50,000 (gain).
iii. What is Andy’s adjusted basis in the land?
1. Andy’s adjusted basis in the land is the cost for what he paid for the
property. Hence, his adjusted basis in the land is $200,000.
c. Philadelphia Park Amusement Co. v. United States: When you have an exchange of
property, your amount realized equals the fair market value of the property that you
received in the exchange. That also becomes the basis in your new property. If the
property that you receive is incapable of valuation, then it is the FMV of the item you
gave away.

GIFTS, BEQUESTS, AND INHERITANCES

1. Gifts, in General—a gift proceeds from detached and disinterested generosity. The Code does
not define a gift
a. Section 102. Gifts and Inheritances—General Rule—Gross income does NOT include
the value of property acquired by gift, bequest, devise (gift by will) or inheritance. In
other words, gifts and inheritances are excluded from gross income.
b. Gift v. Disguised Compensation: Rules of Thumb:
i. Family member to Family member: General presumption that it is a gift.
ii. Donor to Donee who have a commercial business: General presumption that it is
compensation/disguised compensation.
iii. Intent is Critical: Look to the transferor/donor’s intention. Did they make this
gift out of a detached and disinterested generosity?
c. Commissioner v. Duberstein (1960): President of company gave taxpayer a car after
receiving helpful information. Taxpayer did not report the car as income because he
argued that it was a gift.
i. Holding—You have to look at the donor’s intent – he did not give taxpayer the
car out of detached and disinterested generosity. He did this because he wants
more referrals to come his way. Each case must be examined on its particular
facts.
2. Employer-Employee Gifts
a. Section 102(c). Employee Gifts
i. Any amount transferred by or for any employer to, or for the benefit of, an
employee SHALL NOT be excluded from gross income.
ii. Why? You do not work out of a detached and disinterested generosity, so these
employer-employee gifts are more like disguised compensation.
iii. Bright-Line Rule: Between employers and employees, transfers are NOT gifts;
however, there are certain exceptions like fringe benefits.
b. Olk v. Commissioner (1976)—casino dealer must report tokes given to him by customers
as part of gross income
c. Problem: Carol is one of two legal assistants employed by Lucille, a lawyer. The legal
assistants work directly with Lucille and with the two lawyers Lucille employs as
associate lawyers in her law office. This year at the annual holiday office party, Carol
received substantial cash presents from Lucille, from the two associate lawyers, and from
one of Lucille’s clients. The other legal assistant, who has not worked there as long as
Carol, received cash presents of lesser amounts from Lucille and two associate lawyers.
Are the cash presents includible in Carol’s gross income? Consider the following gifts
separately –
i. Gifts from Lucille—It was gross income because there is an employer-employee
relationship. There is section 102(c) that says you have an employer-employee

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relationship and it is hard to get around that. There is nothing in the Section that
provides for some sort of de minimus exception
ii. Gifts from Associates—They are not technically her employer. This is a better
case for a gift then from Lucille. Since there is no employer-employee
relationship, 102(c) does not apply. So now you have to see if there is a detached
and disinterested generosity. We do not have a bright-line test.
1. When he has done things like this on an exam before, he awarded points
to people for knowing what the rule is and then analyzing it and making
a strong argument.
iii. Gifts from Clients—This is NOT gross income. Lucille is least like a gift. The
client is most like a gift. Carol is not actually working for the client, so 102(c)
will not apply. Now, you have to see if the gift was given to Carol out of a
detached and disinterested generosity. You have to take the factors of the
situation in. If it is done during a holiday verses on a normal occasion, it looks
more so like a gift.
d. Reasonableness—You are a blackjack dealer and someone gives you $10,000. This is
not the reasonable toke. Whatever goes beyond reasonableness becomes a detached and
disinterested generosity; therefore, it is a gift.
e. Duberstein Test—Where there is consideration on both sides, there is not truly detached
and disinterested generosity – so, it is not a gift, but compensation instead.
i. Example of Consideration on both sides: Render services in exchange for
bequeath.
3. Basis of Property Received by Gift [KNOW]
a. General Rule (Section 1015): The donor’s basis becomes the donee’s basis. This is true
where you are determining a gain (gifts of appreciated property).
b. Example: Ben purchases a share of stock for $200 and gives the stock to Jen when the
stock is worth $400 per share.
i. First, no gain is realized because a gift is not a realization event – there is not a
sale or exchange, so there is no tax consequence to Ben.
ii. Second, under 1015(a), Jen takes a $200 basis in the stock. This is commonly
referred to as transferred basis. Ben’s $200 basis transfers to Jen. Transferred
Basis Rule assures that the $200 gain at the time the stock is made a gift is still
subject to tax later on.
iii. Exception does not apply here because the basis is not greater than FMV.
c. Exception (Section 1015): The exception applies where you are determining a loss –
where property has gone down in value. In this case, if the basis is greater than the FMV
at the time the gift is made, the FMV becomes the donee’s basis (basis in excess of fair
market value).
d. Example: Ben purchases stock for $200 and gives it to Jen when it’s worth $100. The
value of the stock has declined, and the stock has an inherent loss of $100 at the time of
the gift. What happens if Jen sells the stock for $100?
i. The general rule is that Ben’s basis transfers over to Jen except for at the time of
the gift if the basis is greater than FMV. Jen’s basis is $100 under §1015 for
purposes of determining loss, as Ben’s (the donor’s) basis exceeded the FMV of
the stock at the time of the gift.
ii. In other words, Ben cannot transfer over his loss to Jen. Congress is concerned
that if we just let the general rule be the rule with no exceptions, shifting of tax
losses would occur.
4. Gift of Property – Basis in Excess of Fair Market Value: This will be on exam because of its
difficulty.

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a. General Rules—Under 1015(a), a taxpayer may use a gift to shift income, but the
taxpayer may not use a gift to shift losses.
i. Example 1: Ben buys Jay Low stock for $200. When its value is $100, he gives
it to Jennifer. The value further declines to $75, and Jennifer then sells it for that
amount. What is Jennifer’s gain or loss?
1. Remember, Ben’s adjusted basis was $200 (the basis with no
adjustments because there are no adjustments to stock). The stock value
on the date of the gift was FMV $100. This is a situation where basis is
greater than fair market value – think of the exception. Jennifer then sold
the stock for $75. The amount realized is $75 and the adjusted basis is
$100. Therefore then is a loss of $25.
ii. Example 2: Same facts as above, except that the stock’s value increases to $300,
and Jennifer thereupon sells it for that amount. What is Jennifer’s gain or loss?
1. So, we know our amount realized is $300. The adjusted basis (go back
to §1015 – the general rule is the transfer basis. We apply the exception
when (1) basis is greater than fair market value PLUS (2) you have to
determine a loss.) The exception does not apply here because basis does
not equal more than fair market value and if you use the lower fair
market value ($100) you do not have a loss. So, instead you use the
general rule and transfer over the adjusted basis ($200). $300 - $200 =
$100.
2. You cannot determine Jennifer’s adjusted basis until the time of sale (if it
is going to be a loss or not).
iii. Example 3: Same facts as above, but the stock increases in value to $125,
whereupon Jennifer sells it for that amount. What is Jennifer’s gain or loss?
1. The amount realized is $125. If we were to use $100 as the adjusted
basis, we would have a $25 gain. You created a gain here, but you only
use the exception when you’ve created a loss, so let’s try to use $200 for
the adjusted basis. Here, we’ve created a loss of $75. Regulations would
say that you cannot use either rule here – since that is the case, you have
a NO GAIN/NO LOSS situation here. You will fall into this zone where
you cannot apply either the general rule or the exception and therefore,
you don’t report anything!
b. Anytime you have Amount Realized below the FMV, you have a loss.
c. Anytime your Amount Realized is greater than the Adjusted Basis, you have a gain.
d. Anytime you have adjusted basis greater than fair market value at the time of gift and the
AMOUNT REALIZED is some number between (or equal to) adjusted basis and FMV at
the time of gift, you have no gain/no loss situation.
5. Basis of Property Received by Bequest of Inheritance:
a. Section 1014. Basis of Property Acquired From a Decedent—General Rule: The
FMV of the property at the date of the decedent’s death becomes the donee’s (the person
the bequest or inheritance is going to) adjusted basis.
i. This is referred to as a “stepped-up basis.”
1. Best illustrated by way of example: Taxpayer dies owning land worth
$1,000,000 at the date of taxpayer’s death. Taxpayer purchased the land
many years earlier for $10,000. Taxpayer’s heirs take a basis equal to
the FMV at death, or $1,000,000. So the heirs’ basis is stepped up from
taxpayer’s $10,000 basis to $1,000,000.
6. Statutory Limitations on Gift Exclusion—While the gift or inheritance is excluded, income
from it is NOT excluded; for instance, dividends from the property must be included in your
income.

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SCHOLARSHIPS AND PRIZES

1. Prizes and Awards
a. Section 74 – General Rule: Except as otherwise provided in this section or in section
117 (relating to qualified scholarships), gross income INCLUDES amount received as
prizes and awards.
i. Even though Section 61(a) broadly defines gross income to include all items
from whatever source derived, Congress felt the need to add the prizes and
awards section (to include as gross income) in order to not get them confused
with gifts.
b. Minor Exception – Section 74(b): Basically, if you are picked to receive a prize or
award without any effort on your part, this does NOT have to be included in gross
income.
i. Gross income does not include amounts received as prizes and awards made
primarily in recognition of religious, charitable, scientific, educational,
artistic, literary, or civic achievement, but ONLY IF –
1. the recipient was selected without any action on his part to enter the
contest or proceeding;
2. the recipient is not required to render substantial future services as a
condition to receiving the prize or award; and
3. the prize or award is transferred by the payor to a governmental unit or
organization described in paragraph (1) or (2) of section 170(c) pursuant
to a designation made by the recipient.
c. Prize or Award Paid in Goods or Services—When you receive a prize or award paid in
goods or services, the amount that is includible in gross income is the fair market
value (FMV) of the prize.
i. How is FMV measured?
1. McCoy v. Commissioner (1962)—fair market value at the time of
receipt.
2. Qualified Scholarships
a. What is a Qualified Scholarship? A qualified scholarship means any amount received
by an individual as a scholarship or fellowship grant to the extent the individual
establishes that, in accordance with the conditions of the grant, such amount was used
for qualified tuition and related expenses.
i. What are qualified tuitions and related expenses?
1. Tuitions and fees required for the enrollment or attendance of a student at
an educational organization AND fees, books, supplies, and equipment
required for courses of instruction at such an educational organization.
ii. Is room and board a qualified tuition or related expense?
1. No. Related expenses are ONLY fees, books, supplies, and equipment
required for courses of instruction.
b. Section 117. Qualified Scholarships—Any amount received as a qualified scholarship
by an individual who is a candidate for a degree at an educational organization described
in Section 170(b)(1)(A)(ii) IS NOT to be included as gross income.
3. Scholarships as Compensation: This is where a scholarship IS income!
a. Limitation – Section 117(c): Limitation on general rule that qualified scholarships are
NOT income.
i. [The exclusion for qualified scholarships] SHALL NOT apply to that portion of
any amount received which represents payment for teaching, research, or
other services by the student required as a condition for receiving the
qualified scholarship or qualified tuition reduction.
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b. Example: Al Athlete is an outstanding high school basketball player. Private University

awards a basketball scholarship to him covering tuition and fees ($15,000) and room and
board ($5,000). Private University obviously expects Al to be a star on its team. Any
income?
i. Technically, what portion can be excluded under 117 – the $15,000.
ii. Universities treat athletes like employees and there is an exclusion under §119
for meals and lodging for employees so that is how they exclude the room and
board. This is because they are required to be at certain places at certain times,
etc. so they are like employees.
iii. For academics, the $5000 is not excluded from income. It is different for
athletics because they fall under §119, which we do not have to know for this
class.

LIFE INSURANCE
1. Section 101. Certain Death Benefits—Gross income DOES NOT include amounts received
(whether in a single sum or otherwise) under a life insurance contract, if such amounts are
paid by reason of the death of the insured. There are exceptions, though.
2. Term Life Insurance v. Whole Life Insurance:
a. Term Life Insurance: Usually on a term of one year; you pay $1000 a year to be
covered for $1 million dollars. If you die during the year, your beneficiaries get the $1
million. If you don’t, you don’t get the $1000 back and you have to pay $1000 for the
next year too.
i. The distinction between term and whole life insurance is not important to our
class. However, here is a simple explanation: Suppose taxpayer can purchase a
$1,000,000 life insurance policy for an annual premium of $1,000. This is term
life insurance. If taxpayer dies during the year, taxpayer’s beneficiary gets
$1,000,000. If taxpayer does not die, the insurance company makes $1,000.
b. Whole Life Insurance: If the policy was whole life, taxpayer would pay $1,000 per year
for term life insurance coverage PLUS an additional amount to be invested (i.e. whole
life is simply term insurance plus a savings component). For instance, taxpayer’s
premium may be $3,000 for a whole life policy. $1,000 of the $3,000 is used to pay for
life insurance coverage. The remaining $2,000 of the $3,000 premium is invested,
typically in mutual funds. Under the Code, the amounts invested are not subject to
taxation while the life insurance company holds them. Eventually, the additional
amounts accumulate into something called “cash surrender value,” meaning taxpayer can
surrender the life insurance policy and have the cash surrender value returned to him or
her. So a whole life insurance policy has two elements, (1) term life coverage, and (2) a
savings/investment vehicle. In any event, if taxpayer dies, whether it’s term or whole life
is irrelevant, as the proceeds are tax-free to the beneficiary.
c. The point is, proceeds are proceeds and they are excludible from gross income.
3. Interest Income – Section 101(c): The base amount or proceeds are excludible but the interests
are includible.
a. Example: Assume the ordinary life insurance policy in Problem 2 had provided that the
insurance proceeds of $40,000 would not be paid upon death. Instead, the insurance
company would hold the proceeds for 18 months following the insured’s death and then
pay to the beneficiary a total of $47,500. What tax consequences to Mary when she
receives the $47,500?
i. The $7,500 is includible (taxable) because it amounts really to interest.
ANNUITIES
1. Annuity Defined—An annuity is simply a series of payments over a period of time. Normally,
you think of an annuity being paid annually, but it does not have to be. It can be paid monthly.

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a. Treasury Regulation Definition: “Amounts received as annuity” are amounts payable

at regular intervals over more than a year, provided the time period or the total amount
payable is determinable on the date payments are deemed to begin. Treas. Reg. §1.72-
1(b).
2. Exclusion Ratio – Section 72(b)
a. The Rule: Gross income DOES NOT INCLUDE that part of any amount received as
an annuity under an annuity, endowment, or life insurance contract that bears the amount
that was invested by you.
i. Return on investment IS NOT an accession to wealth; not gross income. Interest
earned on investment IS gross income
ii. In other words, the exclusion ratio equals a fraction, the numerator of which is
the investment in the contract and the denominator is the expected return.
Excluded portion = amount received as an annuity X (Investment in the
Contract / Expected Return).
b. Definitions
i. Investment in the Contract (numerator to the exclusion ratio): The amount of
premiums paid for the contract, less any amount received under the contract
before such date to the extent that it was excludible from gross income; in other
words, your after-tax amount.
ii. Expected Return (denominator to the exclusion ratio): If the annuity is paid in
installments for a fixed period of time, then the aggregate of the amounts
receivable under the annuity contract is the expected return.
iii. Amounts Received as an Annuity: How much you are getting in each payment.
c. Example: In the example above, Taxpayer purchases an annuity for $10,000 from an
insurance company. In return, the company agrees to pay Taxpayer $1000 a year for the
next 25 years. Amount received as an annuity = $1,000 (we’re getting $1000 a year).
Investment in the Contract = $10,000 (consideration that we paid – should not be
includible in income). Expected Return = $25,000 (If we are getting $1000 for 25 years,
multiply them together – this is the amount we expect to get back).
i. Answer: $1,000 X ($10,000 / $25,000) = $400. Thus, $400 of each $1,000
annuity payment is excluded from gross income. The remaining $600 of each
payment is included in gross income under §72(a).
1. The $400 is the amount we exclude from gross income; it gives us our
amount excluded from gross income; hence, the exclusion ratio.
2. If $400 from each $1000 is excluded, that means for each $1000, we
have $600 included in income.
3. Expected Return – Annuity for Life (annuity paid over annuitant’s lifetime)
a. Example One: George Smith pays Friendly Life Insurance $5,000 on January 1 of this
year, George’s 55th birthday. Friendly agrees to pay George (or his estate) $1,000 a year
for ten years. How will the first $1,000 payment be taxed?
i. Annual amount X (Investment Contract/Expected Return) = Exclusion
Ratio
ii. Annual amount = $1000 a year; Investment in Contract = $5,000
iii. Expected Return = Annual amount X number of years that this will be paid
= $10,000
iv. So, $500 is excluded and $500 is included.
b. Example Two: Suppose, alternatively, that George pays Friendly $10,000 and Friendly
agrees to pay George $1,000 a year for the rest of George’s life. How will the first
$1,000 payment be taxed?
i. Annual amount = $1,000; investment in contract = $10,000.
ii. Expected Return = $1,000 X 28.6 = $28,600.

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iii. Exclusion ratio will be 35%, which is $350 (this is the amount that we exclude).
If we exclude $350, then we have to include $1,000 - $350 = $650.
4. Early Death
a. What happens if the annuitant dies before his or her life expectancy and hasn’t
gotten back all of the money that he or she originally invested?
i. Section 72(b)(3): The amount of un-recovered investment shall be allowed as a
deduction to the annuitant for his last taxable year.
ii. Section 72(b)(4): Un-recovered Investment = the original investment in the
contract MINUS the aggregate amounts you’ve received under the contract.
b. Example Three: What tax consequences in Example Two if George dies after three
payments have been made by Friendly?
i. $350 of each payment is excluded. If he has only gotten 3 payments, he has not
received his investment in the contract back yet, which was $10,000. His
deduction will be: Investment in the Contract – Aggregate Amount Returned to
him that had been excluded = $10,000 – (3 X $350) = $8,950. This represents
the amount of after-tax dollars that George never got and this is the un-recovered
investment and the amount his estate gets. The $8,950 is the deduction.
c. FYI: You buy an annuity if you think you are going to live a long time. You buy
insurance if you don’t think you will.
5. Outliving Life Expectancy
a. What happens if the annuitant outlives his or her life expectancy under Table V, in
which case the annuitant has fully recovered his or her initial investment tax-free?
i. Everything you get beyond your life expectancy is taxable; it is includible in
income.
b. Example Four: Assume the facts of Example Two and that George is still living 30
years from now? How will the next 1,000 payments he receives be taxed?
i. He has outlived his life expectancy, so the next $1,000 payment is all taxable (all
includible) because he has already recovered all of his initial investment. It is all
interest or profit.

DISCHARGE OF INDEBTEDNESS
1. Definition – Compare and Contrast
a. Discharge of Indebtedness: Forgiveness of all or part of a loan.
b. Loans (debt) v. Forgiveness of Loans (discharge of indebtedness)
i. Loan proceeds DO NOT represent an accession to wealth (even though your
assets may go up in value but you still have to pay it back) and are thus NOT
gross income because there is an obligation to repay them. For instance,
suppose you borrow $10,000:
1. Assets – Liabilities = Equity (Net Worth)
a. Before loan: Assets ($0) – Liabilities ($0) = Net Worth ($0)
b. After loan: Assets ($10,000) – Liabilities ($10,000) = Net Worth
($0).
ii. Forgiveness of all or part of the loan DOES generate income
1. Assets – Liabilities = Equity (Net Worth)
a. After loan: Assets ($10,000) – Liabilities ($10,000) = $0
b. After forgiveness: Assets ($10,000) – Liabilities ($0) = $10,000.
c. WHEN YOUR DEBT IS FORGIVEN, YOU BECOME WEALTHIER. NOW, YOU
HAVE TO INCLUDE THE AMOUNT OF THE DISCHARGED DEBT IN YOUR
GROSS INCOME.
i. (Argue that cancellation of debt was a gift)

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2. Income from Discharge of Indebtedness

a. General Rule: Section 61 – Gross Income Defined: gross income includes income
from discharge of indebtedness.
b. Exception: Section 108(a) – Income from Discharge of Indebtedness. Exclusion
from Gross Income—If the discharge of the indebtedness (in whole or in part) is
because of (A) a title 11 case [bankruptcy] or (B) the taxpayer is insolvent, the income
will be excluded from gross income.
3. Insolvency Exception – Section 108(a)(1)(B)
a. Insolvency Defined – Section 108(d)(3): Insolvent means the excess of liabilities over
the fair market value of assets. With respect to any discharge, whether or not the
taxpayer is insolvent, and the amount by which the taxpayer is insolvent, shall be
determined on the basis of the taxpayer’s assets and liabilities immediately before the
discharge.
i. In other words, your debts are greater than your assets – you have more liabilities
than you have assets (excess of liabilities over the FMV of assets).
b. Limit on Insolvency Exception – Effects of Discharge of Indebtedness when it causes
Solvency:
i. If you are rendered solvent as a result of the discharge, you HAVE TO
INCLUDE that amount in gross income.
ii. If the taxpayer is insolvent BEFORE and AFTER, all of it is EXCLUDED by
the exclusion from gross income.
iii. If the taxpayer is no longer insolvent AFTER the debt has been wiped out, there
is gross income to the extent you are rendered solvent.
iv. The amount excluded SHALL NOT exceed the amount by which the taxpayer is
insolvent.
4. Disputed and Contested Debts
a. What is the “disputed debt” or “contested liability” doctrine? See Preslar v.
Commissioner (discussed in Overview)?
i. If the amount of the debt is disputed, settlement of that debt in good faith does
not constitute discharge of debt income.
b. What is the difference between a liquidated and an unliquidated debt? Can you
think of a few examples?
i. A liquidated debt is a sum certain – we know how much the debt is.
ii. Unliquidated debt means the actual amount of the debt is in dispute. We know
there is a debt, we just dispute how much.
c. Does it matter whether the debt is liquidated or unliquidated debt under the
disputed debt doctrine?
i. If there is no dispute as to the amount of the debt, it is liquidated, and you cannot
in good faith say …..
d. In Zarin v. Commissioner, the taxpayer settled gambling debts of $3.4 million for
$500,000. Because the gambling debt was unenforceable under state law, the Court
held that the taxpayer realized no discharge of indebtedness upon settlement, as the
debt was unenforceable.
i. Settlement of a disputed debt does not give rise to gross income.
e. Presumably, if the gambling debt was enforceable under state law, the debt would
be liquidated, and the taxpayer would realize discharge of indebtedness income as a
result of the settlement. See Rood v. Commissioner, TC Memo 1996-248, aff’d, 122
F.3d 1078 (11th Cir. 1997).
5. Another Exception – Purchase Price Reductions
a. Section 108(e)(5). Purchase-money debt reduction for solvent debtor treated as price
reduction. If –

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i. the debt of a purchaser of property to the seller of such property which arose out
of the purchase of such property is reduced,
ii. such reduction does not occur –
1. in a title 11 case, or
2. when the purchaser is insolvent, and
iii. but for this paragraph, such reduction would be treated as income to the
purchaser from the discharge of indebtedness, then such reduction shall be
treated as a purchase price adjustment.
6. Performance of Services for Discharge of Indebtedness
a. Treas. Reg. §1.61-12(a). In general. The discharge of indebtedness, in whole or in part,
may result in the realization of income. If, for example, an individual performs services
for a creditor, who in consideration thereof cancels the debt, the debtor realizes income
in the amount of the debt as compensation for services. A taxpayer may realize
income by the payment or purchase of his obligations at less than their face value . .
i. Compensation trumps discharge of debt and it is called compensation. This is
because the insolvency exception does not apply to compensation. We would all
be working tax-free if done otherwise.
ii. In other words, if you perform services to your creditor in exchange for
discharge of your debt, you realize gross income in the form of compensation and
not discharge of indebtedness.
7. Gain Realized on Transactions Involving Discharge of Indebtedness
a. Section 108 DOES NOT exclude gain from dealings in property [61(a)(3) income]
when an insolvent taxpayer transfers appreciated property to a creditor in satisfaction of a
debt.
b. If you have a discharge of indebtedness and gain from an exchange, the insolvency
exception applies ONLY to discharge of indebtedness income and NOT to gain.
There is no insolvency exception for gains and dealings in property. You have to do
a bifurcated analysis in these types of situations – gain must be separated from
indebtedness.
c. Gehl v. Commissioner (KNOW)
i. Facts: Taxpayers owed a huge debt to a company. On two occasions, they
exchanged land in satisfaction of parts of the debt and paid some cash. The
company forgave the rest of the debt. Taxpayers included none of this on their
returns as income. They argued that it was excluded because they were still
insolvent.
ii. Holding/Reasoning: The transferring of deeds is partial satisfaction of a
recourse debt are considered to be sales or exchanges for purposes of Section
1001. Just because they didn’t receive any cash doesn’t mean that there was no
amount realized. While Section 108, which grants an exclusion to insolvent
taxpayers only as to income from discharge of indebtedness, clearly applies to
the forgiven balance of the debt, the land transfers are not within the scope of
§108. Therefore, the gain should have been included in gross income.

COMPENSATION FOR PERSONAL INJURY

8. Section 104, Compensation for Injuries or Sickness—in general, gross income DOES NOT
include the amount of any damages received (whether by suit of agreement and whether as lump
sums or as periodic payments) on account of personal physical injuries or physical sickness.
a. Emotional Distress—shall not be treated as a physical injury or physical sickness, but
medical expense reimbursement for physical manifestation from emotional distress is not
taxed

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b. Lumps Sums and Periodic Payments—excluded (interest on periodic payments is NOT

taxed).
9. Non-Physical Injuries—are generally included in gross income because there is no exclusion for
non-physical injuries.
a. Business or Property Damages—Example, A buys Blackacre for $5K; it appreciates to
$50K. B burns down Blackacre. A receives settlement for $50K. Although no gain was
derived by A from the suit, his prior gain due to the appreciation in value of Blackacre is
realized when it is turned into cash by the money damages. (“In Lieu of Test”)
10. Punitive Damages—are not excluded.
11. Back-Pay & Liquidated Damages Resulting from Forced Retirement—are not included
because the recovery of back wages was not “on account of” any personal injury and because no
personal injury affected the amount of back wages recovered, AND Congress intended liquidated
damages to be punitive in nature. See Commissioner v. Schleier
_____________________________________________________________________________________
DEDUCTIONS
1. § 162 Business Deductions—this section provides that “[t]here shall be allowed as a deduction
all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on
any trade or business.”
a. Expense Requirement—life less than 1 year.
b. “Ordinary” Requirement—generally, this means something that is customary and/or
expected in the life of a business. [Normal, usual, and customary]. In order to deductible,
an expense must be “ordinary” in the business area practiced by the taxpayer. It if is not
ordinary, then it is NOT deductible.
i. Note—this does not mean that the expense must be habitual or normal. It doesn’t
have to be everyday to be ordinary, just customary.
ii. Welch v. Helvering—it is not customary and ordinary for someone to pay
discharged debts that they are not liable for. Most people do not do this; it is not
ordinary; it is not deductible.
iii. Jenkins v. Commissioner—repayment to investor in this case is ordinary because
it’s ordinary for a celebrity to protect his personal business reputation.
iv. Goedel v. Commissioner—it is not ordinary to be able to take out insurance on a
president.
v. Gilliam v. Commissioner—artists and teachers do not normally get into fights
and cause disturbances on flights. This is extraordinary, and not customary.
Therefore, it is not deductible. If you are doing something criminal, you are
going beyond what is ordinary for your business.
vi. Dancer v. Commissioner—as unfortunate as it may be, lapses by drivers seem to
be an inseparable incident of driving a car. Costs incurred as a result of such an
incident are just as much a part of overall business expenses as the cost of fuel.
c. “Necessary” Requirement—generally, this means something that is appropriate and/or
helpful. The Court hesitates to substitute its judgment for that of the business.
i. Palo Alto Town & Country Village—Corporation kept a jet on standby at all
times; it was not used very much, but they liked to have it available in case it was
needed. They would deduct the expenses.
1. Holding/Reasoning: Just because it is more luxurious doesn’t mean that
it is not necessary. If they think it is necessary, then so be it – not going
to second guess the business.
2. Would it matter if the corporation’s CEO consistently used the plane for
personal reasons? Yes, this is different because it is a disguised
personal expense and it would not be able to be deducted.

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ii. Henry v. Commissioner—Accountant wants to take deductions out on his yacht

so he puts a 1040 flag on his yacht for promotion of his occupation. Is this
necessary?
1. Holding/Reasoning: No, this is disguised personal expense. He is
cruising around and having fun all the time. It’s ordinary for an
accountant to advertise but it is not necessary to do so on a yacht.
iii. Reasonable Salaries—§162(a)(1) provides that reasonable allowance for salaries
or other compensation for personal services actually rendered are allowed as a
deduction.
1. Reasonable bonuses are treated as compensation and are deductible.
2. A salary may be a disguised dividend and in that case, the deduction will
be denied.
3. The “Independent Investor Test”—a relevant inquiry is whether an
inactive, independent investor would be willing to compensate the
employee as he was compensated. The corporation’s rate of return on
equity would be relevant to the independent investor in assessing the
reasonableness of compensation in a small corporation where excessive
compensation would noticeably decrease the rate of return.
d. “Carrying On” Requirement—one must already be carrying on a trade or business OR
fall under the §195 “start-up” expenditures in order to deduct.
i. If taxpayer fails this element, but meets remaining elements of IRC 162(a), the
taxpayer can elect to amortize (spread out evenly) the expenses over 15 years.
See IRC 195.
1. Under §195, the taxpayer shall take a deduction of $5,000 and any
remainder has to be deducted over 180 months beginning the month that
the active business begins.
e. “Trade or Business” Requirement—to be engaged in a trade or business, the taxpayer
must be involved in the activity with continuity and regularity and the taxpayer’s primary
purpose for engaging in the activity must be for income or profit. A sporadic activity, a
hobby, or an amusement diversion does not qualify.
2. §212 Expenses for Production/Collection of Income—allows a deduction for the “ordinary and
necessary” expenses of (1) producing or collecting income, (2) maintaining property held for the
production of income (e.g., putting it in a safe-deposit box), or (3) determining, collecting, or
refunding any tax (tax form preparation).

CAPTIAL EXPENDITURES (to be distinguished from deductible business expense)

1. §263—Capital Expenditures
a. General Rule—No Deduction Shall Be Allowed For—
i. Any amount paid out for new buildings or for permanent improvements or
betterments made to increase the value of any property or estate
1. The capital expenditures are added to the basis of the asset.
ii. Any amount expended in restoring property or in making good the exhaustion
thereof for which an allowance is or has been made.
b. Regulations (what are capital expenditures)
i. Expenditures that ARE NOT allowed as Current Deductions
1. There are no current deductions to expenditures that add to the value or
substantially prolong the useful life of property
a. OR adapt property to a new and different use.
2. The disallowance also applies to the cost of acquisition of property
“having a useful life substantially beyond the taxable year.” For
instance, equipment or machinery.

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ii. Expenditures that ARE allowed as Current Deductions

1. “Incidental repairs and maintenance” ARE CURRENTLY deductible.
2. Note: Don’t get this confused with repairs to improve the building – if it
is an improvement, it is a capital expenditure and IS NOT currently
deductible.
c. When are capital expenditures deductible? If we say something is a capital
expenditure, we are NOT saying that it is not deductible. We are just saying that it is
NOT completely deductible in the first year. It is deductible by depreciation.
d. Indopco v. Commissioner—If they are not consumed during the year and they are
going to provide benefits, then those (consulting) fees are capital expenditures. The
benefits are not consumed during the year. They are part of the cost for acquiring an
asset and the same thing applies when you purchase a warehouse – if you buy a
warehouse and you have to pay an attorney, those fees are simply costs of the acquisition
of a capital expenditure. Those amounts are added to the basis of the new asset (if they
are capital expenditures).
2. Cost of Acquisition and Costs Incurred in Perfecting and Defending Title
a. Cost of Fees—Stock is not something that is depreciable because it does not wear and
tear like equipment. However, the stock would be giving us benefits substantially beyond
the year in question and therefore it is a capital expenditure (which is not currently
deductible). Therefore, all the fees associated in acquiring the stock are capital
expenditures just like it was for the warehouse. So, the costs of the fees go to the adjusted
basis of the stock that is acquired. We will get the benefit of that amount when we sell or
exchange the stock. This is because the adjusted basis will be higher at that time.
Woodward v. Commissioner
b. Cost Incurred in Perfecting and Defending Title—Costs incurred in
defending/perfecting title are capital expenditures and cannot be deducted currently
(equivalent to acquisition costs).
i. Where the dispute does NOT relate to the title to property, but to the income from
it, the expense is currently deductible. (e.g., hiring collection lawyer to collect
rents) (“Origin of the Claim” Doctrine)
3. Repair or Improvement?
a. Repair—keeping the property in an ordinary, efficient operating condition; restore to
state it was in before situation prompting expenditure.
b. Improvement—putting the property in ordinary, efficient operating condition;
replacements, alterations, improvements, or additions that appreciably prolong the life fo
the property, increase its value, or make it adaptable to a different use.
c. Regulation Rule—Expenditures for repairs and maintenance (to an asset), which do not
materially add to value or appreciable prolong the useful life, ARE currently deductible.
Replacements or improvements, on the contrary, ARE NOT (capital expenditure and that
money would be added to the adjusted basis of the warehouse).
d. Midland Empire Packing v. Commissioner: A repair is just getting it back to the state
that it was – that is currently deductible.
e. Mt. Morris Drive-In Theatre v. Commissioner: Improvement: The decisive test in
determining if something constitutes a business expense or a capital expenditure is the
character of the transaction that gave rise to the expense. Here, it was obvious from the
beginning that a drainage system would be required and that until this was accomplished,
the capital investment was incomplete. The cost of its construction was really a part of
the process of completing the initial investment in the land for its intended use, so the
transaction was a capital expenditure and gave rise to no business deduction.

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f. Series of Repairs/Rehabilitation or Modernization Plan

i. If you replace a broken lock on one door in the office building, even though the
lock will last substantially more than one year, it is still deductible as a repair.
ii. If you conduct a series of repairs, such as replacing all the damaged doors, locks,
repaint all offices, patch up holes, etc., it becomes an improvement which you
must deduct over the years.
4. Intangible Assets—ownership interest in corporations, partnerships or other entities; debt
instruments; options to provide or acquire property; leases; patents or copyrights; franchises or
trademarks; certain membership fees; prepayment—the cost of acquiring such intangibles must
be capitalized.
a. 12-Month Rule—capitalization is NOT required for amounts paid for a right or benefit
that does not extend beyond the earlier of…
i. 12 months from first realizing the right or benefit, or
ii. the end of the tax year following the year of payment.
5. Expansion Costs—expanding into a new trade or business IS a capital expenditure.
6. Advertising Expenses—Advertising often provides benefits to the taxpayer substantially beyond
a taxable year. So is it currently deductible or a capital expenditure?
a. General Rule: Advertising is currently deductible (even though it may provide a long-
lasting benefit).
b. Exception: If the advertising takes the form of a physical (permanent) asset, then this
will be a capital expenditure (i.e. Big Tire on I-94).
7. Purchase or Lease—§162(a)(3) allows the deduction of rental payments with respect to property
used in a trade or business but only if the taxpayer does not take title and has no equity in the
property. Lease with option to purchase at nominal price will likely be viewed as expenditure.

DEPRECIATION
1. How do you know what is depreciable and what is not?
a. Some capital expenditures are depreciable and some are not.
b. Section 167 – Depreciation
i. In order to be depreciable and get a depreciation deduction for it, the two
requirements must exist—
1. Property must be subject to exhaustion, wear, and tear; and,
2. One of the following:
a. The property must be held for trade or business purposes; or,
b. The property must be held for the production of income.
c. Which of the following are depreciable, if any –
i. Taxpayer’s personal residence? They are subject to wear and tear but you are
NOT using it for trade or business. Primary motivation is personal (to live there).
ii. Stock held for the production of income? Stock is not subject to wear and tear or
exhaustion; therefore, it is not depreciable.
iii. Inventory held in a trade or business? You are constantly buying this and selling
this; therefore, it is not depreciable.
1. Example: John Deere Tractors – it is depreciable to the farmer but not to
you. It is inventory to someone and an asset to someone else.
iv. Land held in a trade or business? Land does not wear out. Land will always be
there.
v. A building, such as a warehouse, used in a trade or business? Buildings wear
out. So, when you buy a building, you typically buy it in the land that it is
situated. How do you determine what is depreciable? You have to allocate part
of the purchase price to the building (which is depreciable) and part of the
purchase price to the land (which is not depreciable). You get a write-off with

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respect to the building but not with respect to the land. You have to sell the land
to get the benefit.
vi. Works of art, assuming such artwork is used in the taxpayer’s trade or business?
Even though they wear out, they are not depreciable. Paintings are around for a
long time. Works of art are not depreciable because there is not a real
determinable life for such things.
2. Is Land Depreciable?
a. Land is NOT depreciable because it does not wear and tear.
b. Taxpayer may write-off or recover the cost of land when he sells/exchanges it.
3. Depreciation Groups
a. Tangible Personal Property (i.e., ovens, desks, trucks, tractors)
b. Real Property (i.e., buildings)
c. Intangible Property (i.e., goodwill, going concern value, customers lists)
d. All other depreciable/amortizable assts
4. What you need to know before Calculating Depreciation
a. Section 168 – Depreciation of Tangible Property: To properly calculate depreciation
of tangible property, you need to know three things (after you have these things, you can
go to the proper depreciation table and make your calculations) . . .
i. Recovery Period (e.g. 5-year, 7-year, etc.);
ii. Depreciation Method (e.g. straight-line or 200% double-declining balance); and,
iii. Convention (e.g. half-year, mid-quarter, mid-month).
b. What is the Recovery Period? Once we’ve decided that the property is depreciable, we
need to decide how long the depreciation period lasts – the period of time which we will
depreciate the asset.
i. Recovery Periods Under IRC §168(a) MACRS
1. Nonresidential real property = 39-year recovery period; i.e. the taxpayer
will depreciate its cost over 39 years. Deductions will be written off
slowly for 39 years.
2. Residential rental property = 27.5-year recovery period.
a. An example would be an apartment or duplex.
3. The taxpayer must generally classify property other than “nonresidential
real property” and “residential rental property” within one of six
recovery periods: 3, 5, 7, 10, 15, and 20.
a. For purposes of this class, we are generally going to use the 5-
year recovery period and by saying that on the exam, you will
get that point. 5 years is generally for personal property (not
personal use property); we are talking about personal property
that is not fixed to lands – trucks, computers
ii. 5-year and 7-year classes are most common and most important.
c. Depreciation Methods—The applicable depreciation method is going to be the 200%
declining balance method UNLESS we are dealing with non-residential real property or
residential rental property; then, we will deal with the straight-line method.
i. 200% Declining Balance Method a.k.a. Double-Declining Balance
1. Used for personal property (distinguished from real estate)
2. Permits larger depreciation deductions in early years of the recovery
period than in later years, i.e. the deductions are “front-loaded.”
3. Congress recognizes that property does not wear out at an even rate. To
stimulate the economy, Congress authorizes this accelerated method of
recovery.
4. This method automatically switches to straight-line for the 1st taxable
year for which using the straight-line method with respect to the adjusted

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basis as of the beginning of such year will yield a larger allowance. The
tables do the switching for you.
ii. Straight-Line Method—Straight-line method allows depreciation on non-
residential real property AND residential rental property.
1. Under the straight-line method, Cost of the Asset/Years in Recovery
Period = Annual Depreciation Allowance
d. Conventions—Convention will tell you when the property was placed in service.
i. Three Kinds of Conventions
1. Mid-Month Convention—Non-Residential Real Property AND
Residential Rental Property
a. Treats all property placed in service during any month (or
disposed of during any month) as placed in service (or disposed
of) on the mid-point of such month.
2. Half-Year Convention—ALL OTHER CLASSES OF PROPERTY – The
general rule:
a. Deemed placed in service (or disposed of) on the mid-point of
the tax year. So, in the first year, you get half of what would
depreciate in a year.
b. There is an exception to this rule, though.
3. Mid-Quarter Convention
a. Anti-Abuse Provision: If the depreciable properties placed in
service (other than nonresidential real and residential rental
property) during the last three months of the year have an
aggregate bases exceeding 40% all depreciable properties placed
in service that year, then the mid-quarter convention applies
instead of the half-year convention.
b. The last three months of the year are October, November, and
December – so watch for 4th Quarter purchases. By the way,
September 30th is NOT in the fourth quarter; it is in the third
quarter.
5. Calculating the Depreciation Deduction—Once you know your recovery period, method, and
convention, then you can calculate depreciation. You ALSO NEED TO KNOW the adjusted
basis, which is the starting point of depreciation.
a. You cannot depreciate more than the adjusted basis of the property.
b. Four Steps to Compute Depreciation Deductions
i. Determine the adjusted basis of the property
ii. Determine the applicable recovery period
iii. Determine the applicable depreciation method
iv. Determine the applicable convention.
c. Multiply the cost by % from table to give you how much you depreciate for that year.
You do not have to adjust the basis when you move to the next year; the table adjusts it
for you. At the end, you should have depreciated the entire cost and your adjusted basis
should be $0 – fully depreciated.
d. Basis must generally be reduced by the depreciation claimed.
6. Section 179 Bonus Depreciation
a. General Rule—allows taxpayer to expense cost of acquisition of certain depreciable
business assets. Despite the general rule that no current deduction is allowable for costs
incurred in acquiring an asset with a useful life extending substantially beyond the tax
year, §179 authorizes taxpayers to expense (i.e. currently deduct) the cost of
acquisition of “Section 179 property” up to a set limit/max ($500K for 2010).

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b. Section 179 property is generally tangible personal property acquired by purchase for
use in the active conduct of a trade or business (the mere production of income is
insufficient).
i. Obviously, this means that §179 cannot be used against real estate.
c. Section 179 is elective.
d. Limits
i. Cannot be greater than the basis in the property
ii. Cannot be greater than gross income form the business
iii. If taxpayer spends more than $2M on tangible personal property, bonus amount
reduced $1 for each $1 spent over $2M.
e. Other Bonus Depreciation
i. 100% in 2010, was 50% for certain personal property
ii. don’t worry about this for this course, and know that Congress will change bonus
and extra bonus depreciation regularly as “stimulus.”
7. Sequence for Taking Deductions
a. First, the taxpayer takes the §179 deduction (described below), if they are eligible and
they elect to take it.
b. If there is still adjusted basis left over, then the taxpayer can take out their regular
depreciation deductions as well – this is where you need to know the recovery period,
method, and convention.
i. Example—(Assuming property is 5-year category) $1M basis, $500K bonus
depreciation = $500K basis for regular depreciation. $500K X 20% = $100K.
Total depreciation = $500K + $100K. Adjusted basis = $1M – $600K = $400K.

LOSSES
1. Section 165—General Rule: A taxpayer can take a deduction for any loss sustained during the
taxable year IF it is not already compensated for by insurance.
2. Limitations on Losses of Individuals: If you are an individual, the deduction allowed for loss
during the taxable year is LIMITED to:
a. Losses incurred in a trade or business;
b. Losses incurred in any transaction entered into FOR PROFIT, even if it’s not connected
to a trade or business.
3. Personal Losses—Generally, personal losses are NOT deductible losses.
4. Example: Taxpayer buys stock for $100, and later sells it for $80. Is the loss on the sale
deductible under §165? Yes, this is a deductible loss because it is a loss that is not covered by
insurance and was incurred in a transaction entered into for profit.
5. Example: Taxpayer buys his personal residence for $200,000 and then later sells it for $195,000.
Is the $5,000 loss allowed under §165? This is a personal loss and therefore is not a deductible
loss.
6. Conversion of Personal Use Property to Income Producing Property
a. If the taxpayer converts personal use property to business or profit-seeking use, how does
the taxpayer calculate adjusted basis for purposes of determining loss?
i. Adjusted basis (for loss purposes) = lesser of (the lower of the two):
1. FMV at time of conversion; and,
a. Use also for calculating loss?
2. Basis at the time of conversion.
a. Use also for calculating gain?
b. What is the policy rationale for this “lesser of” rule?
i. The rule is easier to understand if you understand the rationale behind it.
ii. Example: Personal use property you paid for 100K (this is the adjusted basis)
and the fair market value at the time of the conversion was 80K. How much

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decline in value occurred during the time you owned the property? $20K loss –
this is personal and therefore is not deductible. Let’s say after conversion,
though, it goes down to $50K. Therefore you have a 30K loss and that is what is
deductible. Applying the lesser of rule: AR = 50 and the AB is 80. The AB at
the time of conversion is 80 and FMV that is lower, so here it is 80.
7. Cowles v. Commissioner: Cowles lived in real property for personal use for many years and then
when they went to sell it, they decided to see if anyone would want to rent it but they weren’t
getting good offers, so they just sold it at a loss. Cowles tried to argue that once he attempted to
rent it, it became a transaction for profit.
a. Holding/Reasoning—The court said that the Cowles have to actually rent it out. An
attempt is not enough. Once there is a tenant in there, the conversion occurs. This was
still personal use property and there was no conversion here.
8. Amount of Deduction Business Loss
a. The basis for determining the amount of the deduction for any loss shall be the adjusted
basis.
b. Example—Taxpayer sustains an uninsured loss to business or investment property that
has a value of $100,000 and adjusted basis of only $60,000. What is the deductible loss?

LIMITATIONS ON DEDUCTIONS
1. Section 267(a)(1) Loss Rule—to prevent the deduction of artificial losses, Congress enacted
§267(a)(1), which denies a deduction for any loss incurred on the sale or exchange of property
“directly or indirectly” between certain related persons. §267(b) has the list of relationships that
will trigger the disallowance rule.
a. Related Persons
i. Family members (brother, sister, spouse, descendants, ancestors)
1. Example: Father-Daughter Relationship—this relationship will negate
the deduction of any loss incurred by the father on the sale of stock to his
daughter.
2. Example: Grandfather-Granddaughter Relationship—Three years ago,
Dennis purchased 100 shares of XYZ stock for $30,000. This year
Dennis sold the stock to his granddaughter Christina for $20,000. May
Dennis deduct the loss realized on the sale of stock?
a. Answer—No, Dennis may not recognize any loss on the sale
because of his relationship to the person he sold the stock to.
ii. Certain corporations, partnerships, and trust in which the taxpayer has an interest.

CASUALTY AND THEFT LOSSES

1. §165(c)(3) Casualty Loss—the Code provides that an individual may deduct losses of property
not connected with a trade or business (i.e., personal property), if such losses arise from fire,
storm, shipwreck, or other casualty, but only to the extent that the amount of loss to such
individual arising from each casualty exceeds $100.
a. “Other Casualty”—the loss must result from some event that is . . .
i. Identifiable;
ii. Damaging to Property;
1. Courts have traditionally held that only physical damage to or permanent
abandonment of property will be recognized as deductible.
iii. Sudden;
1. The event must be one that is swift and precipitous and not gradual or
progressive.

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iv. Unexpected;
1. The event must be one that is ordinarily unanticipated that occurs
without the intent of the one who suffers the loss.
v. Unusual in Nature.
1. The event must be one that is extraordinary and nonrecurring, one that
does not commonly occur during the activity in which the taxpayer was
engaged when the destruction or damage occurred, and one that does not
commonly occur in the ordinary course of day-to-day living of the
taxpayer.
2. Theft—with respect to theft losses, the regulations provide that “theft” includes, but is not
necessarily limited to, larceny, embezzlement, and robbery. See Reg. §1.165-8(d). The Service
has ruled that the illegal taking of property done with criminal intent constitutes a theft loss, even
though the act may not fall within the technical statutory definition of “theft” under state law.
a. Theft covers a broad field of illegality including “any criminal appropriation of another’s
property to use of the taker, particularly including theft by swindling, false pretenses, and
any other form of guile.”
b. Proof—the taxpayer needs only to prove that his loss resulted from a taking of property
that is illegal under the law of the state where it occurred and that the taking was done
with criminal intent.
i. The taxpayer need not prove who stole the property in question; it is sufficient
that the reasonable inferences from the evidence point to theft rather than
mysterious disappearance.
3. Timing of Loss
a. Casualty Loss—is deductible in the year sustained.
b. Theft—is deductible in the year discovered.
4. Amount of Loss
a. Casualty Loss—the amount of casualty loss is the lesser of (1) the adjusted basis of the
property; and (2) the difference between the FMV of the property before and after (the
amount of the decline in value).
b. Theft—the value after is presumed to be zero, and the “lesser of” rule becomes simply
the lesser of basis or value.
c. Reimbursements—the amount of loss must be reduced by any reimbursements received,
and, pursuant to §165(h)(1), further reduced by $100; and, only to the extent that the loss
exceeds 10% of adjusted gross income.
5. Insurance Coverage—to obtain a §165(c)(3) deduction, a taxpayer is required to file an
insurance claim if he has obtained insurance coverage (but is not required to obtain the insurance
coverage to begin with).

BAD DEBTS
1. Section 166
a. General Rule: Any debt that becomes worthless within the taxable year is allowed a
deduction (wholly or partially worthless debts).
i. A bad debt must also have the following:
1. It has to be bona fide – it has to have a bona fide debtor/creditor
relationship based on a valid, enforceable obligation to pay a fixed or
determinate sum of money.
2. Watch out for debts between family members – these are disguised as
gifts.
a. Where the relationship is a close one, it will be presumed,
subject to rebuttal, that a gift and not a loan was intended.

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b. Business v. Non-Business Debts

i. Business Bad Debt
1. Business bad debts are incurred in a trade or business.
2. Wholly and partially worthless debts are deductible.
3. Business bad debts do not distinguish between corporations and
individuals.
4. Ordinary loss
ii. Non-Business Bad Debt
1. A non-business debt is one that was not created or acquired in connection
with the taxpayer’s trade or business.
2. It is deductible only upon becoming wholly worthless.
3. It is a short-term capital loss (only deductible to the extent of capital
gains plus an additional $3,000).
c. Shareholder/Employee (see United States v. Generes)
i. In a closely held corporation (one in which the stock is not publicly traded and
relatively few shareholders), a shareholder is often an employee of the
corporation.
ii. When the corporation has cash flow problems, the shareholder/employee will
often lend money to the corporation. If the corporation becomes insolvent and is
unable to repay the loan, the following must occur:
1. Is the loan a business debt or a non-business debt (you have to look at the
dominant/proximate reason for the loan)?
a. If employee is making the loan to protect his employment – it is a
business debt.
b. If employee is making the loan to protect his investment – it is a
non-business debt.
2. How much is deductible? Refer below for how much of a deduction you
get for bad debt.
d. Amount Deductible (when dealing with bad debt)
i. The deduction for any bad debt shall be the adjusted basis for determining the
loss from the sale or other disposition of property.
ii. The amount of the deduction is the loan’s adjusted basis (how much was owed
minus what has been paid).
iii. Example: George lends John $1,000. John repays $200; the balance of the debt
ultimately becomes worthless. What is the amount of George’s bad debt
deduction? In other words, this is asking what the adjusted basis of the debt is;
and here, it is $800 (the outstanding amount of the loan).
iv. Should you be entitled to a loss deduction for uncollectible wages (i.e. you
worked but did not receive your wages)?
1. General Rule: You include things in income when you receive and you
deduct when you pay it.
a. Cash Method: You do not include the income because you
have not received it yet; therefore, you do not deduct.
b. Accrual Method: …
2. Example: Peter, an orthopedic surgeon, agreed to loan his brother Paul $200,000 so that Paul
could start his own small tool manufacturing business. Paul signed a promissory note agreeing to
repay Peter $200,000 together with a market rate of interest on the unpaid balance. Paul’s
business failed two years later and Paul did not repay the loan from Peter. One of the reasons
Paul’s business failed is that his primary customer declared bankruptcy this year and, as a result,
Paul never collected $250,000 owed him. Paul is currently insolvent.
a. Any deduction to Peter?

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i. Yes – Paul signed a note and we can say it’s a bona fide debt. If they never had
an IOU or interest then it would probably be a gift.
ii. Is it business or non-business?
1. Peter would prefer it to be a business; however, it isn’t because he didn’t
loan the money in the course of his own business. Therefore, it is not a
debt incurred in a trade or business and therefore a non-business loan
treated as a short-term capital loss.
b. Under what circumstances, if any, could Paul claim a deduction for the amount of the
debt his customer owes to him?
i. Let’s say he is a cash basis person – doesn’t include until he receives payment.
He never included the 250K in his business before and can’t now – however, if
he was an accrual method payer and he had included this amount in his income
already, … In either case he would get it – in either case the net result is zero!!!
_____________________________________________________________________________________
TAX-FREE/DEFERRED TRANSACTIONS
1. § 121—Sale of Principal Residence—taxpayers may exclude up to $250,000 ($500,000 with
respect to certain joint returns) of the gain on the sale or exchange of a qualifying principal
residence. Taxpayer must own and use the property as a principal residence “for periods
aggregating 2 years or more” during the five-year period (prorate for less than 2 years).
a. Factors—where you’re registered to vote; car registration; driver’s license; bank
accounts; mail delivery.
2. § 1031(a) Like-Kind Exchanges—no gain or loss is recognized when property held for
productive use in a trade or business or for investment is exchanged solely for property of “like-
kind” to be held for productive use in a trade or business or for investment. [Mandatory]
a. Recognized to the extent of boot received. But never more than gain realized.
i. Boot = cash, nonlike kind property, debt relief
b. The minute you get cash, like kind exchanges does not apply
c. Exceptions
i. Stocks, bonds, notes, etc.
3. § 1033 Involuntary Conversion—taxpayer can void gain when property is compulsorily or
involuntarily converted as a result of destruction, theft, seizure, or requisition or condemnation or
threat or imminence thereof. [Only applies to gains, NOT losses]
a. Example—your house burns down, you should get the FMV from insurance to rebuild
the house and not pay tax on it.
b. (a)(1): applies to situations in which property is directly converted into qualified
replacement property
-non-recognition is mandatory
c. (a)(2): applies where property is first converted into money or nonqualified property and
subsequently replaced with qualified property.
-non-recognition is optional
d. Three-Part Test
i. Must have been involuntarily converted
ii. Property must be replaced within 2 years of conversion
iii. Replacement property must be similar or related in service or use (Liant test)
e. Gain is deferred to the extent investment is continues…
i. Amount Realized – Cost of Replacement = Gain Realized.
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CHARACTERIZATION AND INSTALLMENT SALES

Disposition of Property – Step-by-step

Step One: Divide into sales/disposition of property v. other sources of income (i.e., wages, bonuses,
prizes, etc.).
o Other sources of income - ordinary income, regular tax rates will apply.
o For sales or other dispositions of property, continue.

Step Two: Calculate gain or loss realized (AR – AB = gain or loss realized).
o Is gain or loss recognized? If yes, continue.

Step Three: Divide gain/losses into three categories based on the character of the property:
• (1) Capital assets - sale or exchange or property that is not:
• inventory
• real property – lots held for sale to customers (Bynum)
• depreciable property used in a trade or business
• real property – land used in a trade or business
• accounts receivable
• supplies
• (2) § 1231 property, “hotchpot”
• depreciable property used in a trade or business and held for more than one year
• real property (land) used in a trade or business and held for more than one year
• (3) Ordinary
• basically, it’s the things that are exceptions to capital assets and everything else that
aren’t capital assets (short term capital assets)

Step Four: Apply § 1245 recapture (converting gain to ordinary income)

• applies to all depreciable/amortizable property except buildings
• characterize gain as ordinary income to extent of depreciation taken

Step Five: If installment method is applicable, determine amount of gain reported this year
• applies if there is a payment made in a year subsequent to the year of disposition
• does not apply to losses, gain from inventory, § 1245 recapture

Step Six: Net the amount of section 1231/hotchpot (determine if net gains/losses should be ordinary or
capital).
• if net loss => all ordinary loss
• if net gain => all long-term capital gain

Step Seven: Divide into long term capital gains and losses and short term capital gains and losses
• determine net amount in each group
• if one is a loss and the other is a gain, add together net amounts - if both are losses or
both are gains, do not net amounts

Step Eight: Determine tax consequences of character:

o net short term capital gain = ordinary
o net long term capital gain = reduced rate
o net capital loss = limited to $3,000 (each year)
 uses short term 1st
 carry excess forward to next year

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Ordinary Capital

gain
gain - taxed at regular rates
- long term - taxed at reduced rate
- short term - taxed at regular rates

loss
- long and short term
loss - no limitation on loss deduction
- limited to $3,000
- use short-term first
- carry forward excess, retaining character

1. Capital Gains and Losses

a. Three Categories of Income
i. Capital Income
1. Net-long term capital gains are taxed at preferential tax rates.
2. Losses are generally only deductible to the extent of the gains PLUS
$3,000.
3. Example: If you have an excess capital loss of $10,000, you will be able
to use $3,000 against your ordinary income this year and then you have
$7,000 that carries over to the next year indefinitely.
ii. § 1231 Quasi Capital Assets
1. This is a hybrid between Capital and Ordinary.
2. Net gains are treated as capital gains and taxed at favorable rates.
3. Net losses are treated as ordinary losses.
4. However, there is an exception called Recapture.
iii. Ordinary Income
1. All income and losses that are not capital or §1231.
2. Wages are ordinary income.
2. Recapture of Depreciation
a. Applies to
i. Depreciable tangible property
ii. Depreciable intangible property
iii. I.e., everything depreciable/amortizable except building (IRC 1245)
b. Recharacterizes gain as ordinary income to the extent of depreciation taken.
i. (A portion of a blue or green egg becomes red)
c. Recapture is the lesser of depreciation taken or gain
d. Recapture 1245 is triggered:
i. When depreciable personal property is sold, exchanged, or “disposed of”?
1. In other words, 1245 is triggered when gain is realized.
ii. Recapture DOES NOT apply to transfer by gift? However, the section 1245
“taint” passes on to the donee.
1. Remember, on a gift, the tranferor’s basis transfers over to the transferee
and the appreciation is passed as well, so the donee may have a recapture
problem when he later sells the equipment.

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e. Recapture (1245) DOES NOT APPLY to LOSSES.

i. Losses on disposition of depreciable personal property used in a trade or
business held for more than 1 year is ORDINARY under Section 1231 (and does
not apply to 1245). It is called a 1231 LOSS.
ii. Losses on disposition of depreciable personal property used for the production of
income is CAPITAL.
3. Installment Sales
a. What qualifies as an installment sale?
i. One payment in a year subsequent to the year of disposition.
b. What type of gain CANNOT be reported under the installment method?
i. Losses, inventory, recapture of depreciation.
ii. Cannot use installment method payment for the sale of stock (publicly traded
property).
c. What if you don’t want to report gain using the installment method?
i. 453(d) you may elect out.
d. Why would you want to elect out?
i. Put it all in this year’s return if the tax bracket will be lower than next year’s;
and,
ii. With a capital loss  you can only take 3k deduction so you can take the entire
gain now to offset the loss.
e. Equation for how much gain must be reported each year:

Eligible gain x Payment = gain reported

(Selling price – Mortgage.)
_____________________________________________________________________________________

ACCOUNTING METHODS – TIMING ISSUES

1. Cash Method of Accounting—a method for determining what year a taxed item is reportable or
allowable as a deduction. The cash method requires a taxpayer to report cash (and other forms of
income; i.e. property or services) as received in the year that they are actually received or
constructively received and to deduct expenses as they are paid. Inclusion occurs upon actual or
constructive receipt. In other words, a cash method taxpayer includes an item of income in gross
income for the taxable year in which actually or constructively received.
a. Constructive Receipt—A cash method taxpayer is in receipt of income, even though the
taxpayer has not reduced the income to his possession.
i. When does it occur? Constructive receipt occurs where…
1. There is an amount set aside or made available so that you can draw
upon it at any time; and,
2. The taxpayer’s control of the item of income cannot be subject to
substantial restrictions or limitations.
a. Example—An employee cannot fail to pick-up her December
paycheck until January and thereby defer reporting her
December earnings for a full tax year.
b. Cash Equivalence—there are certain intangibles, which have so clear a value and are so
readily marketable and immediately convertible to cash that a cash method taxpayer
receiving them should NOT be entitled to defer reporting income.
i. Includes—Checks, marketable securities (stocks, bonds) are cash equivalent.
ii. Does not include—promissory notes.
c. Economic Benefit Doctrine—economic or financial benefit, to the extent it has an
ascertainable value, conferred upon the taxpayer; has been applied most often in the

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employee compensation contact with respect to prizes and awards held in escrow or trust-
type arrangements (see also retirement programs, excluding 401Ks)
d. Other Timing Concepts
i. Claim of Right Doctrine—gross income includes funds/property coming within
the taxpayer’s control that he is free to do with as he wants and that he claims is
his (even if he may have to repay it later. See North American Oil.
ii. Prepaid Items—gross income includes advance payments. See Indianapolis
Power & Light.
e. Deductions—deduct when paid. No constructive payment doctrine.
i. Remember, look back to IRC 162 requirements of costs associated with a
business.
2. Accrual Method of Accounting—Under the accrual method, the earning of income, rather than
the receipt of it, is the critical event for inclusion purposes; and the fixing of the obligation to pay,
not the payment itself, is the critical event for deduction purposes.
a. The All Events Test—
i. An item of income is includible in gross income when . . .
1. Right to receive income is fixed; and,
a. The Earliest Of Rule—all the events that fix the right to receive
income occur when the first one of these events occur . . .
i. The required performance occurs;
ii. Payment is due; or,
iii. Payment is made.
2. Amount can be determined with reasonable accuracy.
ii. An expense is deductible when . . .
1. All events occur which establish the fact of liability;
a. Liability must be . . .
i. “Fixed and certain”;
1. FYI—a liability that is contingent upon the
occurrence of future events is not “fixed” for tax
purposes. You have to wait until they are fixed.
ii. “Unconditional”; or,
iii. “Absolute.”
2. The amount can be determined with reasonable accuracy; and,
3. Economic performance has occurred with respect to the liability.
3. Annual Accounting Issues
a. Options
i. Take a deduction in the year discover not entitled to income; or,
ii. Compute tax without deduction, but get credit for having paid tax on money not
entitled to.
b. Claim of Right (IRC 1341(a))
i. Applicable if . . .
1. Included amount in income because it appeared that the taxpayer had a
right to the income AND subsequently determine taxpayer did not have a
right.
ii. If you qualify under claim of right, than you can choose either credit OR
deduction (best of both worlds). Otherwise, you get a deduction the following
year.
c. Tax Benefit Rule—applicable when taxpayer claimed a deduction which turned out to be
wrong, followed by recovery of amount deducted.
i. Include the amount in income when you have recovery from something you
deducted;

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ii. No options, as under IRC 1341;

iii. Not required to include the amount in income if no tax benefit was received from
previous deduction.
_____________________________________________________________________________________

WHO MUST REPORT INCOME?

1. Kiddie Tax (IRC 1(g))
a. When does it apply?
i. Children under the age of 18,
ii. When the child has unearned income
b. First $1,600 is tax free
i. After that it’s taxed at the higher of the child’s or parent’s tax rate
c. If parents are divorced, use rate of the custodial parent.
d. Applies to net, unearned income (trusts, stocks).
e. Doesn’t apply if both parents are dead.
2. Compensation/Assignment of Income
a. General Rule—taxed to the person who earned it.
i. Cannot agree or contract to give someone else income to defer reporting it. See
Lucas v. Earl.
b. Exceptions
i. Can work for free and exclude reporting the money if . . .
1. Renounce the money before it’s been earned; AND,
2. Don’t direct disposition of the money (have NO say what they do with it)
ii. Acting solely as an agent
1. Example—cashier at a store
c. Horst Test—who includes income from property?
i. Look to who controls the income (then they pay the tax it). You own the tree,
taxed on the fruit even if it is used by others.
1. Example 1—parent gives a gift of property to an adult child. Who is
taxed on the income from the property after the gift?
a. Child
2. Example 2—parent gives a gift of one coupon from the bond. Who is
taxed on the income from the bond after the gift?
a. Parent
3. Tax Consequence of Divorce
a. Child Support (mandatory provision)
i. Not an accession to wealth by the payee parent
ii. Is it income? No.
iii. No deduction for payor.
b. Division of Property (mandatory provision) - 4TH NON-RECOGNITION PROVISION
i. No gain/loss recognized
ii. Basis = carryover basis of donor spouse (IRC 1041).
iii. IRC 1041 – applies when there is a division of property between spouses.
iv. Applies to:
1. Transfers during marriage;
2. Transfer incident to divorce;
a. Applies if transfer occurs within one year of divorce
b. Presumption applies if transfer occurs within 6 years of divorce
3. Cannot elect out

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c. Alimony (may opt out)

i. Recipient includes as gross income (IRC 71)
ii. Payor can deducts payments (IRC 215)
iii. 7 elements to make a payment alimony
1. Cash;
2. To or for the benefit of the spouse;
3. Pursuant to a divorce or separation agreement;
4. Not designated as not alimony;
5. Not members of same household if legally separated or divorced;
6. No liability after death of payee; and,
7. Not child support.

Simplified Formula for Federal Income Tax

Gross Income
– Above-the-Line Deductions
= Adjusted Gross Income
– Standard or Itemized Deductions
– Exemptions
= Taxable Income
x Rates (Ordinary, Capital, AMT)
= Gross Tax
– Tax Credits
– Prepayments
= Net Tax

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TAXATION
CALCULATING DEPRECIATION
STEP-BY-STEP

► TANGIBLE PERSONAL PROPERTY

Steps:
Bonus Depreciation
Step 1: Did the taxpayer elect section 179 bonus depreciation (generally $500,000)? If so,
determine amount allowed.
- if basis is less than $500,000, bonus amount cannot be more than basis
- if income from business is less than $500,000, bonus amount cannot be more than
income

Step 2: Reduce basis by section 179 bonus deprecation.

MACRS Depreciation
Step 3: Recover remaining adjusted basis (amount determined under Step 2) under MACRS.
- select the correct percentage from the chart based on the class life and year at
issue
- multiply the TOTAL amount to be depreciated under MACRS (note: this
number never changes and will be the number determined in Step 2) by the
percentage from the sheet

- if year of sale, apply the ½-year convention

Step 4: Determine total amount of deprecation:

179 depreciation (Step 1) (first year only)

+ MACRS depreciation (Step 3)
total depreciation

Recovery Period 5-Year 7-Year

Year 1 20.00% 14.28%
Year 2 32.00% 24.49%
Year 3 19.20% 17.49%
Year 4 11.52% 12.49%
Year 5 11.52% 8.93%
Year 6 5.76% 8.93%
Year 7 8.93%
Year 8 4.46%

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Example: The taxpayer purchased a copy machine for $600,000 for use in her business. A copy
machine is five year property. She earned $1,000,000 from her business. Taxpayer elected bonus
depreciation.

Step 1: Taxpayer elected bonus depreciation.

- basis limitation does not apply
- income limitation does not apply
Bonus depreciation is $500,000

Step 2: $600,000 - $500,000 = $100,000 basis

Step 3: percentage from the chart is 20%

$100,000 x 20% = $20,000 for year one
$100,000 x 32% = $32,000 for year two
$100,000 x 19.2% = $19,200 for year three, etc.

Step 4: $500,000 (bonus depr) + $20,000 (MACRS) = $520,000 for year one
$32,000 for year two
$19,200 for year three, etc.

► REAL PROPERTY

Steps:
Step 1: Select the correct chart:
- residential or non-residential real property?
- elect out of MACRS?
Step 2: Using the month the asset was placed in service, select the percentage for the year in
issue.
Step 3: Depreciation = (cost of the property) x (the percentage).

Residential Rental Property (%)

Year Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec
1 3.48 3.18 2.88 2.58 2.27 1.97 1.67 1.36 1.06 .76 .45 .15
2-27 3.64 3.64 3.64 3.64 3.64 3.64 3.64 3.64 3.64 3.64 3.64 3.64
28 1.88 2.18 2.48 2.78 3.09 3.39 3.64 3.64 3.64 3.64 3.64 3.64
29 0 0 0 0 0 0 .05 .36 .66 .96 1.27 1.57

NonResidential Rental Property (%)

Year Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec
1 2.46 2.24 2.03 1.82 1.60 1.39 1.18 .96 .75 .53 .32 .11
2-39 2.56 2.56 2.56 2.56 2.56 2.56 2.56 2.56 2.56 2.56 2.56 2.56
40 .10 .32 .53 .74 .96 1.17 1.38 1.60 1.81 2.03 2.24 2.45

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Example: The taxpayer purchased a shopping center on October 1 for $300,000 for use in his business.

Step 1: use the chart for non-residential property

Step 2: For October, the percentage is .53%
Step 3: Depreciation = $300,000 x .53% = $1,590 for year one
$300,000 x 2.56% = $7,680 for year two
$300,000 x 2.56% = $7,680 for year three . . .

► INTANGIBLE PROPERTY UNDER SECTION 197 (goodwill, customer lists, client

lists, franchise, covenants not to compete, going concern value, etc.)

Steps:
Step 1: Allocate the cost of the asset ratably over 15 years (divide by 180
months).
Step 2: Determine how many months the taxpayer had the asset during the year.
Step 3: Amortization for year = (amount per month) x (number of months).

Example: The taxpayer purchased a client list on November 1 for $36,000 for use in his business.

Step 1: $36,000/180 = 200 per month

Step 2: 2 (November and December)
Step 3: $200 x 2 = 400 for year one
$200 x 12 = 2,400 for year two
$200 x 12 for year three . . .

► OTHER DEPRECIATIABLE/AMORTIZABLE PROPERTY

The cost of the asset is recovered ratably over its useful life.

Steps:
Depreciation = cost of the asset/ its useful life.

Example: The taxpayer purchased a five-year fire insurance policy for his business. The cost of the
policy is $5,000.

Depreciation = $5,000/5
= $1,000 each year

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TORTS I OUTLINE
Professor Mark Dotson, Michaelmas Term 2009

Development of Liability Based on Fault

a. A tort is a civil wrong, other than a breach of contract, for which the law provides a legal remedy.
b. Area of law that imposes duties on persons to act in a manner that will not injure other persons
c. A person who breaches a tort duty may be liable in a lawsuit brought by a person injured by that
tort
d. Initially, you had to have a writ from the King in order to have a claim in court. There were two
writs – trespass and case. Trespass was actionable due to direct harm; a preview of intentional
torts. Case lets you recover on something that isn’t immediate; sort of the precursor to modern
negligence.
______________________________________________________________________________

INTENTIONAL TORTS TO PERSON AND PROPERTY

TORTS TO PERSON
1. Battery: defendant must act (i.e. a volitional movement) with the (1) intent/desire to cause (2)
touch/contact, in a (3) harmful or offensive manner, (4) that was not consented to, and (5) plaintiff
need not be aware of the touching at the time of the touching.
a. Intent: D must act with the desire to cause touching, or the belief/knowledge that the
touching was substantially certain to occur (see Garratt v. Dailey, p.17-20)
i. Test: for intent is subjective  not what a reasonable person would have done, but
rather what the particular defendant in fact desired or believed. (Intent to intrude =
intent to bring about the consequences of the act.)
1. Mistake does not negate the intent (see Ranson v. Kitner)
2. Mental disease does not negate intent, i.e. capability of entertaining the
intent (see McGuire v. Almy)
3. Transferred Intent Doctrine: if D acts intending to cause B/A/FI/TL/TC/C,
D will be liable even if the particular harm to P is unexpected (see Talmage
v. Smith, D throws stick and hits other kid).
b. Touching: of another person, or object universally accepted/intimately connected to the
body, (see Fisher v. Carrousel, snatching plate from hand) (fact for jury).
i. Need not actually touch the person. D drives P off the road, and injures P.
c. Harmful: Injures, disfigures, impairs, or causes pain to any bodily organ or function
OR
d. Offensive: If the touching offends a reasonable person’s sense of personal dignity.
i. The standard for offensive is objective (see Fisher).
e. Without Consent: to be PROVEN by P [For Dotson’s Class]
f. Awareness: P need NOT be aware of the touching.
i. Example: D kisses P, a stranger, while P is asleep = potential battery.

2. Assault: Defendant (1) intended/desired to (2) inflict/cause a battery, the harmful or offensive
touching of P or a third person, OR (3) put P or third person in apprehension of an imminent battery,
(4) not consented to, and (5) plaintiff was aware of the assault at the time of the assault.
a. Intent: same as battery, measured by “desire or belief in substantial certainty.”
i. Transferred Intent Doctrine: Applicable.
b. Cause a Battery: A harmful or offensive touching (see above).
OR
c. Causing a (Reasonable) Apprehension of an Imminent Battery: (see Western Union)
i. To be imminent: D generally needs to have the actual or apparent ability to inflict
touching.

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1. Example: D says, “I’m going to shoot you,” and points unloaded gun at P =
assault.
ii. Test for Apprehension: Subjective (?)
iii. Fear is not required
iv. D may be liable when arousing the apprehension of harm from someone else.
d. Awareness: P must be aware of the assault at the time thereof.
e. Without Consent

3. False Imprisonment: Defendant (1) intentionally caused the (2) confinement/restraining of the
plaintiff, (3) against their will (no consent), (4) that was unlawful, and (5) P was aware.
a. Intent: D purposely caused the action that restrained the other person, measured by the
“desire or belief in substantial certainty” test.
i. Transferred Intent Doctrine: Applicable.
b. Confinement: must be some specific area in which P is completely confined by D’s acts,
requires P be restricted to a limited area w/o knowledge of a reasonable means of escape.
i. There is no confinement if reasonable means of escape are available and known to P.
(P under no duty to search for a means of escape or run risk of harm to
person/property).
ii. Threats alone (i.e. words) to person/immediate family/property may be sufficient for
FI.
c. Against Their Will (No Consent): if the person consents to the confinement, no FI (see
Hardy v. LaBelle, P said she would have stayed anyway = no FI).
d. Unlawfulness: lawfulness of confinement may not be FI…
i. Legal Authority w/o Lawful Confinement: see Enright v. Groves, police make an
unlawful arrest of P  FI.
e. Awareness: There is no confinement unless P knows that he is confined at the time of
confinement or is harmed by the confinement (see Parvi v. City of Kingston)

4. Intentional Infliction of Emotional Distress: One who (1) intentionally, or (2) recklessly, by (3)
extreme or outrageous conduct, (4) causes (5) severe emotional distress to another person, (6) without
their consent.
a. Intentionally: D purposely caused the emotional distress or knew with substantial certainty
that emotional distress would result from conduct. (See Taylor v. Vallenlunga, P’s father
beaten in front of her, D did not know P was there).
i. Transferred Intent Doctrine: NOT Applicable.
b. Recklessly: Where D acts in deliberate/conscious disregard of a high probability that his
actions will cause emotional distress (essentially “substantial certainty”).
c. Extreme or Outrageous Conduct: conduct that must exceed “all bounds of decent behavior
which could be tolerated by society.” Words alone may be a sufficient act. (See State
Rubbish Collectors Ass’n v. Siliznoff, Rubbish made threats of future harm to Siliznoff, words
= outrageous). Legitimize claim, HARD ELEMENT TO PROVE IN COURT.
i. Objective Standard
ii. Totality of the Circumstances
d. Causation: the conduct must have directly caused distress.
e. Severe Emotional Distress: must be more than a reasonable person in society could be
expected to endure/tolerate. (See Harris v. Jones, P had a speech impediment, D made fun of
P, not severe)
i. Mere insults, indignities, threats, annoyances, petty oppressions, or other trivialities,
NOT SEVERE.
ii. Exacerbation of pre-existing condition may not be severe.
f. Without Consent

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TORTS TO PROPERTY
1. Trespass to Land: D’s volitional movement of some part of his body or sets in motion a force
resulting in the (1) intentional/desire, to (2) interference with (intrude onto) (3) the exclusive rights to
possess land of another’s (4) that was not consented to.
a. Intentional: D must act with the desire to do the act that causes intrusion, or knew with
substantially certain that his actions would cause entry.
i. Transferred Intent Doctrine: Applicable.
ii. Mistake does not negate, Court Presumes Harm
b. Interfering With: may be by personal entry onto land or by causing some third person or
thing to enter.
i. Particles or Substance: when air pollutants accumulate on land and there is actual and
substantial damage = TRESPASS. If not, then maybe NUISANCE (See Bradley v.
American Smelting and Refining Co.)
ii. Failure to Leave Land/Remove Property, after permission to remain has expired (See
Rogers v. Board of Road Commissioners, D failed to remove snow fence posts).
c. Exclusive Right to Possess Land of Another: P must have “actual possession” or “right to
immediate possession” of land.
i. Airspace: P’s land extends upwards (See Herrin v. Sutherland, D fired shotgun blast
over P’s property).
ii. Limitations: Commercial airplanes. No trespass, may still have action of nuisance.
d. Without Consent:
i. With the consent of the person then in possession of the land, if the actor fails to
remove object after the consent has been effectively terminated  liable, OR
ii. If the actor fails to remove it after the privilege has been terminated, by the
accomplishment of its purpose or otherwise.

2. Trespass to Chattels: D’s volitional movement, or force set in motion, that (1) intent/desire, to (2)
interfere (dispossession of, or intermeddling with) (3) the exclusive right to possess the chattel of
another (4) that caused (5) actual damage.
a. Intentional: D intended to deal with the chattel in the manner in which he did deal with the
chattel.
i. Transferred Intent Doctrine: Applicable.
b. Using (Dispossession Of): conduct amounting to D’s assertion of a proprietary interest over
the interest of the rightful owner
i. Example: theft of the chattel, joyriding
OR
c. Intermeddling With: intentionally bringing about contact with the chattel (not actual
physical contact, see CompuServe)
i. Example: throwing a stone at a car, beating another’s animal.
d. The Chattel of Another: actual possession or right to immediate possession (same as
trespass to land)
e. Caused: must have been legally caused by D’s intentional act.
i. Dispossession of chattel;
ii. Impaired it as to its condition, quality, or value;
iii. Deprived of the use for a substantial time;
iv. Injury to the possessor;
v. Harm to some person or thing in which the possessor has a legally protected interest.
f. Actual Damages: ARE REQUIRED, liable for the harm that results from the trespass. Pay
for the damage
g. Without Consent

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3. Conversion (of Chattel): D’s volitional movement, or force set in motion, with (1) intent/desire, to
(2) exercise dominion or control over a chattel, that (3) so seriously interferes with the exclusive right
of another, to the extent that the law is going to (4) required to pay full value of the chattel (buy the
chattel), that was (5) not consented to (Rest.2d §222A).
a. Intent: D intended to deal with the chattel in the manner in which he did deal with the
chattel. (Meant to do what D did)
i. Transferred Intent Doctrine: Applicable.
b. Exercise of Dominion or Control Over: invasion required is greater than that required for
trespass to chattels.
i. Substantial Dispossession: possession by fraud, theft
ii. Destroying/Altering: intentionally running over pet
iii. Using: violating the terms of the bailment
iv. Buying/Receiving Stolen Goods: from a thief
v. Selling/Disposing of Stolen Goods: bailee wrongfully sells the chattel
vi. Misdelivering Chattel: delivery to a wrong person by mistake so that the chattel is
lost.
vii. Refusing to Return/Surrender Chattel on Demand
1. EXCEPTION: investigate claimant’s right to chattel.
c. Substantially Interferes with the Exclusive Right of Another: (factors influencing
conversion)
i. Extent and Duration: two types
1. Of dominion or control;
2. Of resulting interference
ii. Actor’s Intent Inconsistent with Other’s Right to Control
iii. Actor’s Good Faith: cannot obtain title by theft
iv. Harm to the Chattel: not required, but maybe important
v. Inconvenience/Expense Caused to the Other
d. Require to Pay Full Value of Chattel/Damages: equal to the fair market value of the chattel
at time of conversion, i.e. “BUY” the chattel.
e. Without Consent

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PRIVILEGES/DEFENSES TO PERSON AND PROPERTY:

1. Consent: Not an Affirmative Defense for purposes of Dotson’s class, i.e. plaintiff must show that
consent was not given.
a. Based on P’s Behavior:
i. Actual Express Consent: communicates willingness to submit to conduct
ii. Apparent Consent (Implied from Conduct): in light of the circumstances led D to
reasonably believe submission of P (O’Brien v. Cunard and Hackbart v.
Bengals)
b. Consent Goes to Act, NOT Inducement: failure to follow through on inducement to
consent does not negate the consent to the act.
c. When Consent is NOT A DEFENSE:
i. Acts in Excess of Consent Given—in a non-emergency situation, a doctor needs
express consent.
1. MEDICAL EXCEPTION—when it is 1) necessary to preserve life, and 2)
it is reasonable to assume the person would consent if conscious, and (3)
no reason to believe patient would refuse treatment.
ii. Consent by Fraud—consent to invasion is ineffective if procured by fraud.
1. Collateral Matter: fraud to a collateral matter, consent is still valid
a. Example: A pretends to be B, C consents to sex with A thinking
A was B. When C finds out B was A, C sues. The fact that A
was pretending to be B does not negate the intent.
i. Sex is essence of the consent.
iii. Consent by Coercion—consent invalid
iv. Consent by Involuntary Intoxication—consent invalid
v. Consent by Duress—consent given under physical force, or threats of physical
force is ineffective.
vi. Mistake—P’s consent is ineffective if due to a mistake caused by or known to D
1. Mistake of Law—?
2. Mistake of Fact—If P fails to understand the nature or consequences of
the invasion of her person or property, consent is ineffective
a. Lack of consent in medical treatment
i. See Above (1, iii, a, a)
b. Lack of informed consent—If P alleges that she was not
adequately informed of the risks and benefits prior to surgery
vii. Incapacity to Consent—e.g. infant; mentally incompetent
1. Children—need consent from parent (exception in the case of
emergencies)
viii. Criminal Acts
1. Majority—consent to a criminal act is ineffective if the act involves a
breach of the peace
2. Minority—consent to a criminal act is effective except where P is a
member of a class protected by statute

2. Self-Defense:
a. Existence of Privilege: anyone is privileged to use reasonable force (under the facts and
circumstances) to defend himself against a threatened intentional tort on the part of
another.
b. Retaliation: privilege does not extend to retaliation; when the threat ends, the privilege
terminates. Even if you are the aggressor, when you retreat you can now use self-defense
against the person you initially threatened.

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c. Reasonable Belief: privilege exists when D reasonably believes that the force is
necessary to protect against threat.
d. Provocation: insults, verbal threats, or opprobrious language does not justify the
exercise of self-defense.
e. Amount of Force: limited to the use of force that is threatened, or reasonably appears to
be necessary for protection against threat.
i. SERIOUS FORCE: used only when D has a reasonable apprehension of loss of
life or GBH.
f. Retreat: is not required unless the situation calls for Serious Force, and only then if it is
possible to do so without increasing the danger. Do NOT have to retreat before defending
yourself
g. Injury to Third Party (Transferred Intent): A defending himself against B injures C.
Self-defense holds, unless there is some form of negligence

3. Defense of Others: Similar to that of Self-Defense, the closer questions concern reasonableness
of force in the circumstances
a. Reasonable Mistake (Mistake of Fact): D is privileged to use reasonable force to
defend another even when he is mistaken in his belief that intervention is necessary, so
long as his mistake was reasonable.

4. Defense of Property: Involves attempting to stop someone from interfering with property
a. Only reasonable force, under the circumstances, may be used to prevent intrusion of land
or chattels (D may not use deadly force)
i. May Use Reasonable, Nondeadly Force If:
1. Intrusion by P is not privileged;
2. D reasonably believes force is necessary to prevent or terminate the
intrusion; AND
3. D, prior to the use of force, makes a demand that the intruder desist or
leave (unless demand is futile).
4. Serious Force (deadly or serious bodily harm) is NEVER appropriate for
defense of property alone
a. UNLESS, the defender finds himself in a situation where self-
defense requires it in the course of defending the property

5. Recovery of Property (Recapture of Chattel): Involves the recovery of property from one
unauthorized to take it.
a. Elements
i. Possession of the Property was Obtained Wrongly
1. Does not include property obtained properly and retained wrongly
ii. Property Owner in Fresh/Hot Pursuit (time starts on knowledge of
dispossession)
1. The longer the time period, the less the privilege
2. When the privilege expires, a suit must be brought
iii. Only Reasonable Force Under the Circumstances
1. The greater the value of chattel, the more force
a. More than reasonable, A/B of D
2. Serious Force may only be used in Self-Defense
iv. D Must Have Superior Right to Possession of the Property
1. Need not be the owner, only the legal possessor
v. D Must Demand the Return of the Property
1. Unless, such a demand would clearly be futile

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b. Mistake of Fact is NOT a Defense

c. Shopkeeper’s Privilege:
i. Detention may occur if there is a reasonable belief that P has taken property, for
reasonable investigation
1. On or within the vicinity of the store (fresh pursuit)
2. Only reasonable force may be used
3. Must be for a reasonable amount of time
4. One it has been determined that nothing was taken, the person must be
immediately released

6. Necessity: Only applicable to Trespass to Land/Trespass to Chattels/Conversion

a. Public Necessity:
i. Action taken to protect the public’s interest
ii. Must be shown that D reasonably believed that the action taken was immediately
necessary to avoid greater harm to community (see Surocco v. Geary, stop
spread of fire)
iii. Complete Defense (No Cause of Action, No Damages may be Recovered)
b. Private Necessity:
i. For D’s own personal safety
ii. Must be shown that D reasonably believed that action was necessary to avoid
greater harm to himself (or his property) (see Vincent v. Erie Transp. Co.,
damage to dock caused by ship in storm)
iii. Incomplete Defense (No Cause of Action for Trespass, but Damages may be
Recovered)
1. If you are privileged to trespass on land, the owner’s use of force/harm
against you, you may bring a suit for battery, etc.
______________________________________________________________________________

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NEGLIGENCE
ELEMENTS OF CAUSE OF ACTION (Breach of Duty, Caused Damages)
1. A duty to use reasonable care, requiring the actor to conform to a certain standard of conduct for
the protection of others against unreasonable risks.
2. A failure to conform to the required standard; commonly called breach of duty. These two
elements make up what the courts usually have called negligence.
3. Causation—a reasonably close causal connection between the conduct and the resulting injury.
Two Types: Causation in Fact and Proximate Causation.
4. Actual loss or damage resulting to the interests of another.

THE (OBJECTIVE) STANDARD OF CARE

1. The Reasonable Prudent Person: Negligence is the failure to exercise the care and caution
which a reasonable and prudent person ordinarily would exercise under like conditions and
circumstances.
a. Custom: while the evidence of custom and usage is highly relevant to the reasonable
person standard, it does NOT per se define the scope of negligence (see Trimarco v.
Klein). When there is proof of custom and showing that D ignored custom, and this
departure was a proximate cause of the accident, might serve to establish liability [i.e.
goes to reasonableness].
b. Emergency Situations: the law does not hold one in an emergency to the exercise of
that mature judgment required under circumstances where there is an opportunity for
deliberate action (see Cordas v. Peerless Trans. Co.)
i. What if D created the emergency? Do not use lesser degree of reasonableness.
c. Disabled/Handicapped: a disabled person must take precautions, be they more or less,
which the ordinary reasonable man would take if he were similarly disabled (see Roberts
v. State of Louisiana)
d. Minor: generally, a child is held only to the exercise of such degree of care and
discretion as is reasonable to be expected from children of similar age, experience, and
intelligence (more may be required for a child of superior intelligence)
i. HOWEVER, when the minor is engaged in an inherently dangerous activity
typically reserved for adults (i.e. adult activity), they will be held to the same
adult standard of care (see Robinson v. Lindsay)
e. Insanity: generally, an insane person is liable when dealing with a pre-existing insanity
of a permanent nature (mental disability)
i. Includes pedophilia (mental disease)
ii. Minority Rule: when one is suddenly subject to a type of insanity or mental
illness absent a notice or forewarning is not held to the reasonable person
standard (see Breunig v. Amer. Fam. Ins. Co.)
2. The Professional (i.e. Malpractice): one who engages is a business, occupation, or profession
must exercise the requisite degree of learning, skill, and ability of that calling with a reasonable
and ordinary care [the knowledge, training and skill (or ability and competence) of an ordinary
member of the profession in good standing]  IF SPECIAL TRAINING, RAISE the standard of
care.
a. Expert Witness Testimony: required for professional negligence.
b. Attorney: An attorney who acts in good faith and in an honest belief that his advice and
acts are well founded and in the best interest of his client is not answerable for a mere
error of judgment or for a mistake in a point of law which has not been settled by the
court of last resort. [Dotson holds attorneys in Hodges negligent, despite what the court
said]

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c. Physician/Surgeon: in the area of medical diagnosis, treatment, and the like, the duty of
care is generally formulated as that degree of reasonable care and skill expected of
members of the medical profession under the same or similar circumstances.
i. Expert Witness Testimony: required when the negligence is a matter beyond the
findings of a layperson [Battle of the Experts]
1. Locality (Minority) Rule: the conduct of members of the medical
profession is to be measured by the standard of conduct of other
members of the medical profession in the same locality or the same
community (typically, urban v. rural)  substandard treatment
a. National Certification = National Standard
2. Dotson’s Class Rule: Similar Community in Similar Circumstances,
except when dealing with someone who deals with national certification.
ii. Informed Consent: physician has a duty to full disclosure (inform) a patient of
his options/alternatives and their attendant material risks. (Duty to inform,
causation, injury)
1. Material Risk: a risk that would be likely to affect the patient’s decision.
A reasonable person would attach significance to.
2. Causation: requires that the (subjective) patient would have chosen no
treatment, or a different course of treatment, had the alternatives and
material risks of each been known to him.
3. Injury: causes injury to P
4. Privilege: Physician may have privilege if full disclosure would be
detrimental to the patient’s best interest.
iii. Fiduciary Duty: physician has a duty to disclose personal interests unrelated to
the patient’s health, whether research or economic, that may affect the
physician’s professional judgment.
3. Aggravated Negligence: degrees of care, degrees of negligence, “willful, wanton, and reckless
conduct”
a. Automobile Statutes: the driver of an automobile is liable only for some form of
aggravated misconduct to one who is riding as a guest in a car.

RULES OF LAW: courts need to exercise caution in framing standards of behavior that amounts to rules
of law when there is no background of experience out of which the standards have emerged. In the
default of the guide of customary conduct, what is suitable for the traveler caught in a situation where the
ordinary safeguards fail him is for the jury.
1. Common Law
2. Statutory Law
3. And those Standards of Care

VIOLATIONS OF STATUTE: where a statute or municipal ordinance imposes upon any person a
specific duty for the protection or benefit of others, if he neglects to perform that duty he is liable to those
for whose protection or benefit it was imposed for any injuries of the character which the statute or
ordinance/regulation was designed to prevent, and which were proximately produced by such neglect.
Statute must FIT to the facts of the case and the circumstances. [Legislation articulates prohibitions on
actions for reasonable persons to accept; look into legislative history before incorporating/ determining
the fitness of the regulation before applying in civil cases]
1. Negligence Per Se: violation of a statute constitutes conclusive evidence of negligence (i.e.
negligence per se).

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2. Applicability of Statute:
a. Class Harm Test/Threshold Questions: Violation results in an injury, whether P belongs
to the class that the statute was intended to protect, and whether P’s injury is of a type
that the statute was designed to prevent?
b. Applicability Absent Common Law Duty (Criminal Statutes)—should be considered in
deciding whether to apply negligence per se. Courts use the statute to determine whether
D breached his common law duty of care. Courts are reluctant to create a new duty.
i. Example: at common law, there is generally no duty to protect another from the
criminal acts of a third party or to come to the aid of another person in distress.
3. Effect of Statute: to omit, willfully or heedlessly, the safeguards prescribed by law is to fall
short of the standard of diligence to which those who live in organized society are under a duty to
conform. Both P and D can argue that a statute establishes negligence and contributory
negligence.
a. Rebuttable Presumption of Negligence—offer an excuse to rebut the presumption that
you were negligent (no excuse = negligent). Jury decides whether excuse is justified.
b. Negligence Per Se—any violation of statute = negligence, do not care why violated.
Judge decides whether excuse is justified.
c. Evidence of Negligence—violation only evidence of negligence, which the jury may
accept or reject as it sees fit.
d. Dotson Rule—if considering an excuse, do not treat the violation of negligence per se. If
not entertaining an excuse (whether judge or jury) it is negligence per se.

PROOF OF NEGLIGENCE: Evidentiary Standards

1. Direct Evidence: eye witness testimony
2. Circumstantial Evidence: which is nothing more than one or more inferences that may be said
to arise reasonably from a series of proven facts.
a. Example: no one saw a person walk through the snow, but there are footprints.
b. Problems that might arise when relying on circumstantial evidence…
i. Can you prove the case solely based on circumstantial evidence?
ii. How much circumstantial evidence is enough?
3. Res Ipsa Loquitur: Latin for “the thing speaks for itself.” The doctrine simply recognizes that
in rare instances, an injury may permit an inference of negligence if coupled with a sufficient
showing of its immediate, precipitating cause.
a. Elements (4), P MUST PROVE ALL [SEE NOTE 3 on pg. 244]
i. There was an accident
ii. Accident was of a nature that it would not have happened in the ordinary cause of
events if D was using reasonable care, i.e. not negligent.
1. See McDougald, “more likely than not”; expert witness testimony may
afford sufficient basis for inference.
iii. The object or instrumentality that causes the accident must have been under the
exclusive control and management of D
1. A chair thrown from a hotel room is not under the exclusive control of
the hotel, but under (partial) control of the guest.
a. Unlike the case where a warehouse/employer has control of its
employees
2. Narrow Exception to Exclusive Control
a. Physicians: where P receives unusual injuries while
unconscious and in the course of medical treatment, all those
defendants who had any control over his body or the
instrumentalities that might have caused the injuries, may

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properly be called upon to meet the inference of negligence by

giving an explanation of their conduct.
i. Either all defendants were negligent, or know who was
ii. Shifts the burden; D must prove non-negligence.
iv. Neither P nor a third party contributed to or caused P’s injuries.
b. Procedural Possibilities When RIL Relied on by Court: (1) allow creation of
inference of negligence (most), (2) as creating a rebuttable presumption of negligence (D
presume negligent unless D rebuts presumption), (3) shift the burden to D of proving
non-negligent conduct. [Quantum difference between 2 and 3]
i. Just because the res ipsa loquitur doctrine is applicable, it is up to the jury to
choose the inference of D’s negligence in preferences to other permissible or
reasonable inferences.

CAUSATION (both cause in fact AND proximate cause must be met)

CAUSATION IN FACT
1. Sine Qua Non: But for D’s negligence the injury would not have been sustained. If injury would
have happened any way, there is no liability
2. Proof of Causation:
a. Standard—Preponderance of the Evidence (50% + 1, “more likely than not”)
i. Possibilities do not prove causation (probabilities do), though they are admissible
ii. Suspicion, regardless of how particularized it may be, is NOT sufficient to
sustain an action. Unsupported conclusory or speculative statements do not raise
a genuine interest of material fact.
b. “Substantial Factor” Rule: if either one of 2 acts was sufficient to cause the injury, both
actors are liable if each person’s conduct was a substantial factor.
c. Chance of Survival: depends on the jurisdiction…
i. Dismiss Case: More likely than not, P would have died anyway.
ii. Case to Jury: Lost (reduction) chance of surviving as a consequence caused by
negligence, did D reduce chance of surviving?
1. Hard to determine the damages (proportionate?)
d. Daubert v. Merrell Dow Pharmaceuticals, Inc. Two-Prong Test: overruled the old Frye
test (scientific evidence was admissible if it was based on a scientific technique generally
accepted as reliable within the scientific community).
i. First, a court must determine
1. Whether the experts’ testimony reflects “scientific knowledge”
2. Whether their findings are “derived by the scientific method”
3. Whether their work product amounts to “good science"
ii. Second, the expert testimony is “relevant to the task at hand” (i.e., that it
logically advances a material aspect of the proposing party’s case.
iii. Factors for Determining Whether to Admit Expert Testimony
1. Whether the theory or technique employed by the expert is generally
accepted in the scientific community.
2. Whether it’s been subjected to peer review and publication
3. Whether it can be and has been tested, and
4. Whether the known or potential rate of error is acceptable
iv. The test is NOT the correctness of the expert’s conclusion, but the soundness of
his methodology.
3. Concurrent Causes: Where separate acts of negligence combine to produce directly a single
injury, each tortfeasor is responsible for the entire result, even though his act alone might not

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have caused it. Where one’s actions alone would have caused the injury, even though multiple
actions resulted in the injury. SUBSTANTIAL FACTOR TEST, goals: deter and compensate.
a. Example: A’s fire joins with B’s fire, burns C’s property. But-for A’s actions, C would
not have been injured, But-for B’s actions, C would not have been injured.
b. Fires (Majority) Rule: If one fire is set, and it unites with another fire, there is joint and
several liability, even though either fire would have destroyed P’s property.
c. Distinguish From JOINTLY ENGAGED TORTFEASORS
d. Distinguish from Contributory Negligence
4. Problems in Determining Which Party Caused the Harm: Where there are two or more
tortfeasors with “concert of action”, whereby the conduct of one of them caused the injury of P,
but the exact source of the injury is unknown, all the tortfeasors are liable. Shift burden to Ds to
prove they did not cause injury. Extraordinary circumstances must exist to shift the burden of
proving causation.
a. Example: Two Ds fire guns at the direction of P. P is injured by one shot. Both shooters
are liable (see Summers).
b. Enterprise Liability: If P could establish by a preponderance of the evidence that the
harm/injury caused was manufactured by one of the defendants, the burden of proof as to
causation would shift to all the defendants.
i. This theory of liability applies to industries composed of a small number of units
ii. Market-Share Liability: Liability can be imposed upon manufacturers in
accordance with their share of the national market, notwithstanding P’s inability
to identify the manufacturer particularly at fault for her injuries.

PROXIMATE/LEGAL CAUSE (liable for proximate results, not for remote damages)
1. Proximate Cause: any cause which in the natural and continuous sequence, unbroken by an
efficient intervening cause, produces the result complained of and without which the result would
not have occurred. [Proximate cause does not necessarily involve matters that are temporal in
proximity or time] There will never be any CORRECT answer, only the answer the court gives.
Do you want the D to “stay in the game”? Yes, then not proximate. SEE NOTE 5 on pg. 294
a. Need only be a cause which sets off a foreseeable sequence of consequences, unbroken
by any superseding cause, and which is a substantial factor in producing the particular
injury.
i. Example: D negligently sets fire, damages P’s property, and adjoining property
of P2. D is liable to first property damage, and depending on jurisdiction the
adjoining property, but that is it.
2. Unforeseeable Consequences (not the manner in which it was brought about):
a. Egg Shell (Thin Skull) Rule: take the victim as you find her.
i. Pre-Existing Conditions: D is liable in damages for the aggravation of P’s pre-
existing illness. Court finds pre-existing conditions are reasonably foreseeable.
b. Directly Traceable/Hindsight Test: If the act would or might probably cause damage,
the fact that the damage it in fact cause is not the exact kind of damage one would expect
is immaterial, so long as the damage is in fact directly traceable to the negligent act (see
Polemis).
i. Similar to a but-for causation test
c. Foreseeability Test/Prominent Test (always apply unless told otherwise): Was the
type of injury foreseeable?
i. Type v. Severity v. Manner
1. Type of harm must be foreseeable
2. Severity and Manner need NOT be foreseeable

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a. Example: D negligently runs into child on tricycle. A wheel on

the tricycle is bent, and the child falls, has hemophilia, and
bleeds to death
i. Severity: death (more severe than would be anticipated,
but irrelevant)
ii. Manner: tipping over due to bent wheel (could not have
foreseen the damage to the tricycle, but that is irrelevant)
iii. Type: Falling injury (a falling injury would be expected,
and a falling injury was sustained. This is the relevant
point. There is liability)
ii. Question of foreseeability is left to the jury (see dissent in Yun v. Ford Motor
Co.).
3. Intervening Causes: negligent act without any initial injury until someone else got
involved/intervened and caused the injury. Liability turns upon whether the intervening act is
normal or foreseeable consequence of the situation created by D’s negligence.
a. Superseding Causes: intervening cause that cuts off liability when defined as
superseding, if the ultimate injury was NOT reasonably foreseeable as the natural and
probable consequence of the negligent act.
i. Foresee negligent acts of third parties
ii. DO NOT foresee intentional, voluntary, malicious acts of third parties, but just
because the act is criminal does not make the act unforeseeable
1. As a matter of law, suicide is not a superseding act
a. Unless the suicide was preceded by history of trauma, brain
damage, epileptic seizures, caused by physical damage caused by
D (an Irresistible Impulse Test/involuntary act)
b. Some jurisdictions impose a duty of care to prevent suicide on
certain classes of defendants (hospitals, psychiatrists)
b. Rescue Doctrine: allows an injured rescuer to sue the party that caused the danger
requiring the rescue in the first place. The doctrine may be invoked in product liability
actions just as it may in ordinary negligence actions. (Why? Encourage people to help
others out) “danger invites rescue”
i. To Achieve “Rescuer Status” One Must Demonstrate:
1. D was negligent to the person rescued and such negligence caused the
peril or appearance of peril to the person rescued.
2. The peril or appearance of peril was imminent (imminent need to rescue)
3. A reasonably prudent person would have concluded such peril or
appearance of peril existed, AND
4. The rescuer acted with reasonable care in effectuating the rescue.
ii. Extends to rescuers of rescuers, negligence of Dr. on rescuer
iii. Fire Fighter Rule: precludes the professional who’s responsibility it is to save
others.
4. Public Policy: in some cases, courts rely on public policy considerations to decide cases that
might otherwise lack the merits to proceed.
a. Social Hosts: court created a duty on hosts not to serve alcohol to visibly intoxicated
guests, or allow them to drive home (reasonably foreseeable that an accident may occur if
drunk person drives home).
i. Most jurisdictions do NOT impose this duty
ii. Dram Shop Act: liability for commercial vendors who supply alcohol
iii. Some jurisdictions have imposed liability on employers when employee becomes
intoxicated at work (work-related function)

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b. Products Liability Re-examined: An injury to third generation does NOT establish a

cause of action in favor of the party against the original tort-feasor.

DUTY OF CARE: “relationships, always a question of law.” Courts recognize that a general duty is
owed to avoid creating an unreasonable risk of physical harm to others when engaging in affirmative acts.
1. Privity of Contract:
a. Nonfeasance: in general, when there is only the promise and the breach, only the
contract action will lie, and no tort action can be maintained.
i. EXCEPTIONS
1. Public Utility/Common Carriers: undertaken the duty of serving the
public, becomes liable in tort when it fails to do so, whether or not it has
made a contract.
b. Misfeasance: when D misperforms the contract, the possibility of recovery in tort is
greatly augmented. Most distinguish b/t mere preparation and performance.
i. Duty to perform contract does NOT extend to possible, indefinite beneficiaries of
the contract being performed (see Rensselaer Water Case).
ii. Attorney Duty: the duties or obligations inherent in an attorney-client
relationship will not be presumed to flow to a third party and will not be
presumed to arise by implication when the effect of such a presumption would be
tantamount to a prohibited or improbable employment, absent the clearest
exposition of facts from which such an employment may be fairly and rationally
inferred.
2. General Principles for Duty
a. Duty Defined—A person engaging in affirmative conduct that has the potential to
physically harm others, that person has a duty to use reasonable care to avoid harm
(misfeasance)
i. Thus, affirmative conductphysical harm DUTY
b. Generally, duty is negatively defined (“there is no duty…”)
3. Failure to Act: there is no general duty to go to the rescue of/assist a person who is in peril
[“With purely moral obligations the law does not deal.”]. Nonfeasance—A person does not owe
a duty for a failure to act unless he meets one of the following exceptions.
a. EXCEPTIONS: when D is a master or invitor, or when the injury resulted from use of an
instrumentality under the control of D, there may be a legal obligation to take positive
steps to rescue.
i. Volunteers – attempting a rescue creates a relationship
1. A volunteer is under a duty to not make things worse.
2. A gratuitous promise to volunteer/rescue does not create a relationship
(unless the promise makes a contract)
ii. Prior Innocent Conduct – if innocent conduct creates a mess, the creator is
responsible for cleaning it up
1. Thus, if a car innocently knocks down a pole, the driver must move it or
be liable for injuries caused by the pole being in the road.
2. However, if the innocent conduct does not create the danger, the person
is not liable
a. Trucker drives over weakened bridge, making it even weaker, no
duty to warn other motorists.
iii. When D Assumes a Responsibility to Act
1. (Some Detrimental Reliance) Babysitter
iv. Relationship Can Create a Duty to Act
1. When the D is an invitor or master and injury resulted from use of an
instrumentality under the control of D.

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2. Factors Determining Whether a Duty Should be Imposed/Created

a. Foreseeability and severity of harm
b. Opportunity and ability to exercise care to prevent the harm
c. Relationships among the parties
d. Ultimately, Public Policy and Fairness
3. Rest.2d §315: there is no duty so to control the conduct of a third person
as to prevent him from causing physical harm to another unless (a) a
special relationship exists b/t the actor/D and the third person, or (b) a
special relationship exists b/t actor and the other which gives to the other
a right to protection….
4. Examples: Special Relationship
a. Employer-Employee Relationship
b. Common Carrier-Passenger
v. Extension of Special Relationship Doctrine to Third Parties
1. Spouse that has actual knowledge or particularized knowledge (i.e.
special reason to know) that the particular person (other spouse, or class)
is engaged in harmful activity with particular type of injury; there is a
duty to take reasonable steps to prevent or warn of the harm (see J.S. and
M.S. v. R.T.H).
a. Typically, ‘relationship’ concept does not extend to family; i.e. it
must be created
2. Professional (Physician): when patient poses a serious danger to others,
the single relationship b/t a doctor and his patient is sufficient to support
the duty to exercise reasonable care to protect the foreseeable others
(with some specificity) against the dangers emanating from the patient’s
illness
a. Reasonable Care: reasonable to the degree of skill, knowledge,
and care ordinarily possessed and exercised by member of [that
professional specialty] under similar circumstances.
4. Purely Economic Loss (No Physical Injury): Limiting Liability
a. Traditionally, no duty to prevent economic losses to prevent flood of litigation
b. No recovery unless there is a compensable physical injury to the person
c. Exceptions
i. Proximate damage to property (property interest)
ii. Fraud cases
5. Mental and Emotional Distress: possible methods of handling emotional distress…
a. Common Law, “Impact” Test: Traditionally, one could not recover damages for
emotional disturbance unless that disturbance was accompanied by (“parasitic to”) a
showing of physical injury or impact.
i. Example: P frightened into a heart attack by a charging bull denied recovery b/c
there was no injury from the bull itself.
ii. Most jurisdictions have abandoned the “impact” test
b. “Zone of Danger” Test: where P has narrowly avoided imminent and serious harm to
his own physical well being, courts allow recovery upon showing of mental disturbance.
c. Daley Test: where a definite and objective physical injury is produced as a result of
emotional distress proximately caused by D’s negligent conduct, P can recover damages
for physical consequences despite the absence of any physical impact upon P at time of
mental shock.
i. Physical injury as it relates to the mental distress (i.e. nervous disorder, seizures,
etc.)

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ii. No recovery for hypersensitive mental disturbance where a normal individual

would not be affected under the circumstances
iii. Burden of Proof—on P to show that physical harm or illness is the natural result
of the fright proximately caused by D’s conduct.
d. The Dillon/La Chusa Test: P may recover damages for emotional distress caused by
observing the negligently inflicted injury of a third person if, but only if, P is…
i. Closely related to the injury victim (leaves it to the courts to decide on a case-by-
case basis);
ii. Present at the scene of the injury-producing event at the time it occurs and is then
aware that it is causing injury to the victim (i.e. proximity to accident and
observation, not hearing); and
iii. As a result, suffers serious emotional distress—a reaction beyond that which
would be anticipated in a disinterested witness and which is not an abnormal
response to the circumstances.
6. Unborn Children:
a. Wrongful Death: no duty owed to the fetus, unless they are born, derivative/third party
cannot bring a claim b/c no liability.
i. Expansion—some courts allow cause of action for prenatal injuries when
inflicted on a viable fetus (capable of living outside the womb) that was
subsequently born alive.
b. Wrongful Birth: cause of action on behalf of parents for a child they did not want.
i. Healthy Children
1. Didn’t want any child, and P had child due to D’s negligence (denying
parents right to abort)
2. Most juries don’t allow recovery (cost of raising – benefit of having child
= no damages)

ii. Sever Birth Defects

1. Defects not caused by doctor, action is for having an unwanted child
2. Recovery only for extraordinary medical expenses
iii. Recovery: For extraordinary medical expenses and parents’ pecuniary losses
resulting from mental distress (in seeking help/counseling)
iv. Statute of Limitations accrues at birth
c. Wrongful Life: cause of action on behalf of the child claiming it would be better had
they not been born (causation issues with this claim)
i. NOT recognized in many jurisdictions
ii. Statute of Limitation begins to accrue at age of majority
iii. Cannot recover for defect, only extraordinary medical expenses
7. Duty of Land Owners/Occupiers
a. Conditions of the Land
i. Natural Conditions (usually nonfeasance)
1. No obligation to make natural conditions safe.
a. Examples: mountains, beaches, lakes, etc.
ii. Artificial (Man-Made) Conditions (Usually misfeasance)
1. When a person makes something, there is a duty to make it safe.
a. Example: man-made ponds
b. Liability for Harm Outside the Property
i. Trees—natural condition (usually nonfeasance, and thus no duty)
1. Exception—trees by the road (see Taylor v. Olson)
a. Duty to act as a reasonable person (determined by jury)

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ii. Salevan v. Wilmington Park, Inc. (Baseball Stadium Case/Artificial Condition)

1. P gets hit by baseball on adjoining street; D knew baseballs flew out
there every game
2. Duty to protect passer-bys if the danger is known
c. Liability for Harm on the Property (Premises Liability): Three Categories
i. Trespassers—No right to be on property, no notice of presence
1. No duty to make the property safe
2. When presence is known, there is a duty not to take affirmative action to
hurt them
3. Frequent Trespassers in a Limited Area—duty is still only not to take
affirmative action to harm/reasonable care for their protection, EXCEPT
for defense of property
ii. Licensees—social guests and persons on the property for their own business
purposes/benefit (people permitted to be on the property)
1. Permission to be on the property  Notice  Duty to act as a reasonable
person from that time forward
2. Once the guest has arrived, the duty is not to remove the danger, but
merely to warn of latent/hidden dangers unknown to P but D knew, or
had reason to know.
iii. Invitees—business guests and people (public invitee) on the property for the
owner’s purposes
1. Example: buyers even if individuals have no intent to purchase anything
(walkers in the mall)
2. Duty to make property safe before their arrival (act as a reasonable
person)
3. For homeowners, includes those coming up the sidewalk to knock at the
door (postal workers, etc.)
4. Public Land—the state/city/county owes to persons coming on the
premises a duty to all persons to use reasonable care to keep the premises
safe (Ex. libraries, parks, etc)
5. There is a duty to make a reasonable attempt to protect invitees from
harm (anticipated criminal activity) as well as to not perform operations
in a way that might unreasonably cause harm.
iv. Changes in Status—the status of a person may change
1. Example: person in a grocery store
a. Initially, an invitee
b. When receives permission to go into the back room, becomes a
licensee [invitee ceases to be an invitee after the expiration of a
reasonable time within which the purpose for which he is invited
to enter, or to remain]
c. When exceeds that permission, becomes a trespasser
v. EXCEPTIONS to Categories (Children, Privileged Persons)
1. The Attractive Nuisance Doctrine: when a landholder sets before young
children a temptation that he has reason to believe will lead them into
danger, he must use ordinary care to protect them from harm.
a. Does not apply to cases where the children were not attracted
onto the land and induced to trespass in the first instance by the
thing that injured them.
2. Rest.2d §339 “Artificial Conditions Highly Dangerous to Trespassing
Children: a possessor of land is subject to liability for physical harm to

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children trespassing thereon caused by an artificial (NOT natural)

condition on the land if…
a. The possessor knows or has reason to know that children are
likely to trespass; and
i. Ex. Swimming pools
b. Condition involves an unreasonable risk of death or serious
bodily harm to such children; and
i. Ex. Drowning in the pool
c. Children, b/c of youth, do not discover condition or realize risk
i. Ex. “it’s just a pool, I swim all the time”
d. The utility outweighs the risk
i. Ex. Having v. not having the pool
e. The possessor fails to exercise reasonable care to eliminate the
danger or protect the children
i. Ex. Put a fence around the pool
3. Privileged Persons: some courts have abandoned the category system as
applied to public officers and simply apply a general reasonable-care,
negligence standard.
8. Duty of Lessors
a. Generally, no duty
i. Tenants do not want owners making safety inspections of their apartments
ii. Tenant has exclusive control, the duty falls to the tenant
b. EXCEPTIONS
i. Undisclosed, or non-obvious, conditions of the property known to the landowner,
but not to the tenant
ii. Conditions dangerous to persons outside the property at the time of transfer
iii. Premises leased for admission of the public must be inspected and repaired at the
time of transfer
iv. Parts of land retained in the landowner’s control
1. Ex. Hallways in Apartment Buildings
v. Those areas the landowner contracts to repair
vi. Negligence by the landowner in making repairs
1. Not failing to make repairs, but doing it badly
vii. Third parties, in some jurisdictions
c. Lessors in High Crime Areas
i. There is a duty to take reasonable action to protect tenants from criminal activity

______________________________________________________________________________

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DEFENSES
1. Plaintiff’s Conduct
a. Contributory Negligence (5 jurisdiction still use this)
i. If negligence on the part of P contributed to the injury, then P can recover
nothing (all-or-nothing) [Question of Fact]
ii. An affirmative defense which must be raised in D’s Answer to the Complaint
1. D must prove by Preponderance of the Evidence
iii. Requires—Duty/Breach/Cause/Damages (represented by the injury being sued
for in the first place)
iv. NOT a Defense to an Intentional Torts, Strict Liability
v. EXCEPTIONS
1. Seat Belts/Motorcycle Helmets
a. Negligence in not wearing; does not cause the injury.
b. An anticipatory avoidable consequence,
c. Recovery limited to damages that would have been sustained if
wearing
2. Last Clear Chance Rule
a. If D has the last clear chance to avoid the harm, and negligently
fails to do so, then P may recover
b. Comparative Fault (Negligence)—alternative policy (but still technically falls under the
category of contributory negligence)
i. Jurisdictions (burden on D to prove) COMPARE TO INDIVIDUAL Ds
1. Pure Comparative—P’s damages are reduced in proportion to the
percentage negligence attributed to him
a. Example: if P is 90% responsible, P can only recover only 10%
in damages.
2. Modified Comparative—P recovers only remaining proportion in
damages, if P’s negligence either…
a. Does not exceed D’s negligence (i.e. 50% or less); OR
b. Is less than D’s negligence (i.e. 49% or less), compare to
individual defendants [CLASS/DOTSON RULE]
c. Assumption of the Risk—Rare that P assumed the risk
i. P assumes the risk of D’s negligence
1. Example: Race Car Drivers assume the risk of negligence of other
drivers going unsafe speeds
ii. Express Assumption (see Seigneur v. NFI, Inc.)
1. P signs a release form (contractual concept)
2. Articulate with clarity the waiver.
3. Three Exceptions—When public interest renders express assumption
unenforceable
a. Does not apply to intentional or reckless conduct
b. Ineffective when bargaining power is unequal
i. Example: necessary services like education, innkeepers,
public utilities, etc.
c. When transaction involves the public interest
4. Courts may ignore for public policy reasons
iii. Implied Assumption
1. Primary—D is not negligent, either b/c he owed no duty to P or b/c he
did not breach the duty owed.

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a. Example: Turbulence on an airplane (duty only to operate with a

degree of care of an ordinary prudent person under similar
circumstances)
i. But no assumption of risk for extraordinary turbulence
resulting from substandard operation of the plane
2. Secondary—real affirmative defense
a. Requirements
i. P had actual (subjective) knowledge of the risk
ii. P knew the seriousness/magnitude of the risk
iii. P voluntarily encountered the risk
b. Pure/Strict—conduct that is reasonable, yet bars recovery (i.e.
rescuer acts reasonably)
i. Example: Running into a burning house to save a baby
1. Still apply the Rescue Doctrine, and don’t
penalize for assuming the risk of burning
c. Qualified—conduct which is unreasonable and bars recovery
(i.e. P acts unreasonably/negligently)
i. Example: Running into a burning house to save a hat
1. Comparative liability is allowed

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TORTS II OUTLINE
Professor Mark Dotson, Hilary Term 2010

DAMAGES
TYPES OF DAMAGES: proof of damages is an essential part of the plaintiff’s causes of action in
negligence and strict liability.
1. Nominal Damages: these consist of a small sum of money awarded to the plaintiff in order to
vindicate rights, make the judgment available as a matter of record in order to prevent the
defendant from acquiring prescriptive rights, and carry a part of the costs of the action. The
amount of the award, so long as it is trivial, is unimportant [rarely awarded]
a. Nominal damages to vindicate a technical right cannot be recovered in a negligence
action if no actual damage has occurred (see pg. 132)
2. Compensatory Damages: these are intended to represent the closest possible financial
equivalent of the loss or harm suffered by the plaintiff, to make the plaintiff whole again, to
restore the plaintiff to the position the plaintiff was in before the tort occurred [but also
discourages/deters future similar conduct]
3. Punitive Damages: these are an additional sum, over and above the compensation of the
plaintiff, awarded in order to punish the defendant, as well as specific and general deterrence [see
more below on page 2 of this outline].

PERSONAL INJURIES: there are five cardinal elements of damages: past physical and mental pain,
future physical and mental pain, future medical expenses, loss of earning capacity, and permanent
disability and disfigurement (see Anderson v. Sears, Roebuck & Co.). Plaintiff entitled to be present in
court unless conduct is disruptive (see Cary v. Oneok, Inc.).
1. Economic Injury (Special Damages): expert witness testimony just a guide
a. Medical Expenses: the plaintiff is compensated for reasonable medical expenses.
Medical expenses may include bills for hospitals, doctors (including psychiatrists),
physical therapists, nurses, medications, x-rays, wheelchairs, crutches, braces, and travel
expenses.
i. Past Expenses: these are proved at trial by submitting the bills into evidence or
through testimony
ii. Future Expenses: these must be proved by expert testimony establishing the
anticipated need and predicted cost.
iii. Limitations: Plaintiff will be able to recover unless the costs incurred were not
related to the tortious injury, were unnecessary (unreasonable), or excessively
high (higher than reasonable).
b. Increased Risk of Illness/Disease: if P has no physical illness or disease but negligent
exposure increased risk of contracting disease in future, P may recover for the increased
risk itself.
c. Lost Wages: if the plaintiff was employed at a fixed wage at the time of injury, the
wages lost during the time of injury are relatively easy to calculate.
d. Loss/Impairment Future Earning Capacity: if the injury is one from which the
plaintiff does not recover and reenter the workforce, the measure of damages will include
loss of earning capacity.
i. What Must Be Proven
1. The jury must be persuaded that the injury is permanent
2. Expert testimony needed to assist the jury in estimating what the plaintiff
would have earned during their lifetime (life expectancy tables).
a. The jury can rely on tables of life expectancy only as a general
guideline in determining how long P was expected to live, as

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well as P’s sex, prior state of health, nature of daily employment,

manner of living, personal habits, and individual characteristics.
e. Damage Calculation: Present Value: plaintiff is awarded a lump sum to compensate
for all future pecuniary losses, such as loss of future wages or future medical expenses.
Most jurisdictions require that the lump sum award for future losses be reduced to its
“present value.” The present value is computed by formula or by reference to table once
it has been determined at what interest rate to assume P will be able to invest the lump
sum.
2. Non-Economic Injury (General Damages)
a. Physical Pain and Suffering/Mental Anguish (Past and Future): these include not
only suffering prior to trial, but also any suffering reasonably certain to result from the
injury in the future. Since pain, suffering and mental anguish are not capable of being
reduced to any precise equivalent in money, there can be no fixed standard by which
damages for them can be measured, i.e. leave question for jury to decide, subject to
control by the court.
i. Physical Pain: may be for only a short duration or chronic symptoms predicted
by experts. P must be conscious to recover this element of damages
ii. Loss of Function or Appearance: recover for this element type includes: loss of
taste/smell, incontinence, impotency and loss of sexual desire, insomnia, change
in personality and attitude, and scars and other disfigurements.
iii. Emotional Distress: emotional distress may be an element of damages only if the
plaintiff suffers physical injury.
iv. Litigation-Induced Stress: most courts have not recognized it as a separate
component of damages because this type of stress is inherent in most litigation.
b. Permanent Disability and Disfigurement: the award for this element of damage must
evaluate in monetary terms the compensation due the plaintiff for the permanent physical,
mental and emotional disabilities and disfigurements proved by the evidence adduced at
trial.
c. “Hedonic” Damages/Loss of Enjoyment of Life: some jurisdictions allow plaintiffs to
recover for the loss of specific aspects of their lives as part of recovery for pain and
suffering (integrated jurisdictions), while some characterize it as a separate element of
damages (segregated jurisdictions; argue cap only applies to “pain and suffering” and not
hedonic).
d. Pier-diem Argument: counsel for plaintiff breaks down physical and mental suffering
down to days, hours, or even minutes, set a value on each unit, and multiply it by the total
number of units that the pain and suffering has lasted and may be expected to last.

PUNITIVE DAMAGES
1. The facts warranting punitive damages must be established by clear and convincing evidence
rather than a preponderance of the evidence standard
2. Common Law Standard for Recovery—must show malice  “willful misconduct, wantonness,
recklessness, or want of care indicative of indifference to consequences”
a. Some jurisdictions require compensatory damages for punitive damages to be sought
i. Does not apply to intentional tort of trespass cases
b. Need at least nominal damages before seeking punitive damages
c. Establish financial condition of the defendant to seek punitive damages (but not
admissible during liability phase of trial) [Bifurcation]
3. No fundamental right to punitive damages
a. State Farm Mutual Automobile Ins. Co. v. Campbell 538 U.S. 408 (2003): the Due
Process Clause of the 14th Amendment prohibits the imposition of grossly excessive or

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arbitrary punishments on a tortfeasor. To the extent an award is grossly excessive, it

furthers no legitimate purpose and constitutes an arbitrary deprivation of property.
b. BMW of North America Inc. v. Gore Guideposts:
i. The degree of reprehensibility of the defendant’s misconduct
1. Consider: the harm caused was physical as opposed to economic, the
tortious conduct evinced an indifference to or a reckless disregard of the
health/safety of others, target of the conduct had financial vulnerability,
conduct involved repeated actions or was an isolated incident, and the
harm was the result of intentional malice/trickery/deceit/or accident.
ii. The disparity between the actual or potential harm suffered by plaintiff and
the punitive damages award (i.e. ratio b/t compensatory and punitive)
1. Few awards exceeding a single-digit ratio between punitive and
compensatory damages, to a significant degree, will satisfy due process
a. 1-1 ratio or less in maritime law
b. Rarely will double-digits get passed the Court’s analysis
iii. Comparison with comparable civil or criminal fines or penalties
1. Courts have often looked to criminal penalties that could be imposed.
Punitive damages are not a substitute for the criminal process, and the
remote possibility of a criminal sanction does not automatically sustain a
punitive damages award.

LIMITATIONS ON DAMAGES
1. Judicial Control of Amounts Recovered: an award of damages will be deemed excessive or
inadequate if it falls outside the range of fair and reasonable compensation OR results from
passion or prejudice, OR if it is so large that it “shocks the judicial conscience” (see Richardson
v. Chapman).
a. If the judicial review of the verdict concludes that the award was grossly
excessive/inadequate, the judge(s) must then decide whether to set aside the verdict and
grant a new trial on both liability and damages, or to allow the liability portion to stand
and to grant a new trial on damages alone.
b. Remittitur: excessive…conditioned upon refusal of P to accept lesser amount
c. Additur: inadequate…conditioned upon D’s refusal to pay a larger sum
d. “Maximum Recovery Rule” (KNOW): this rule directs the trial judge to determine
whether the verdict of the jury exceeds the maximum amount which the jury could
reasonably find and if it does, the trial judge may then reduce the verdict to the highest
amount that the jury could properly have awarded.
2. Legislative Control of Amounts Recovered (i.e. Caps): about half of the state legislatures have
passed laws that in some way limit the amount of damages recoverable. Many are applicable
only to particular types of claims (e.g. medical malpractice claims, claims against the
government).
3. “Collateral-Source Rule” (KNOW): prevents defendant from introducing evidence of collateral
payments/benefits for purposes of offsetting its liability; exclude evidence of payments received
by an injured party from sources collateral to the wrongdoer, such as private insurance or
government benefits. Recoveries from collateral sources “do not redound to the benefit of a
tortfeasor, even though double recovery for the same damage by the injured party may result”
(see Montgomery Ward & Co., Inc. v. Anderson).
a. Rationale: 1. Aversion to rules that benefit wrongdoers, 2. Contractual subrogation
typical in insurance agreements or created by common or statutory law, 3. Encourages
purchasing of insurance, and 4. Full amount better reflects real losses.

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b. When benefits are conferred upon the plaintiff gratuitously (a gift) by a third party, as
when a plaintiff is nursed without charge by the spouse, the prevailing rule is that
plaintiff is entitled to recover the reasonable value of the services from the defendant
i. Minority Rule—no recovery for gift, only recovery when plaintiff charged for
services.
4. Duty to Mitigate (Doctrine of Avoidable Consequences) (KNOW):
a. Avoiding Permanence of Injury: the plaintiff in a personal injury case cannot claim
damages for what would otherwise be a permanent injury if the permanency of the injury
could have been avoided by submitting to treatment by a physician, including possible
surgery, when a reasonable person would do so under the same circumstances (see
Zimmerman v. Ausland).
i. Factors to Consider Whether Treatment Would Be Reasonable
1. Risk involved (i.e. the hazardous nature of the operation)
2. Probability of success
3. Expenditure of money or effort required
4. Religious Beliefs (factor to consider for DOTSON)
5. (Possibly also the pain involved)
ii. Other Factors (when not surgery)
1. Follow doctors instructions
2. Take medication
3. Don’t work
b. Finding Employment—substantially similar work
_____________________________________________________________________________________
COMPENSATION SYSTEMS AS SUBSTITUTES FOR TORT LAW
TYPES OF NO-FAULT INJURIES
1. Workers’ Compensation (Employment Injuries)—Mandatory workers’ compensation laws
grant the employer immunity from liability for (work-related) injuries assuming employer’s
conduct doesn’t fall within one of the statutory exceptions, and allow employees to recover for all
claims for personal injuries arising out of and in the course of their employment, regardless of
fault. These statutes provide the exclusive remedy for an employee against the employer.
a. Generally, courts consider whether the injury may reasonably be regarded as an incident
of employment rather than whether the injury was specifically foreseeable (see Burns v.
Merritt Eng’g Co.).
b. The worker can usually still sue a third party in tort, as well as sue their employer for
intentional torts, acts/omissions that are “intentional, malicious, and in willful and wanton
disregard of the duty to protect the health of employees” [Exception] (see Blankenship v.
Cincinnati Milacron Chemicals, Inc.).
c. Dual Capacity Doctrine [KNOW FOR EXAM]—one can sue employer if they act in a
non-employer role.
i. Ex. Defective Apple computer causes injury (Apple = manufacturer) when
working for Apple (Apple = employer).
1. Get WC and sue for product liability
ii. Discussed at length in class, so probably need to know for the exam
d. Defenses—if lawsuit brought against employer in the first place
i. If employee intentionally hurts herself, no recovery
2. Automobile Accident Injuries (“No-Fault” Auto Insurance)—no fault means that when it
comes to auto accidents, you are precluded from turning to the courts to seek recovery for
damages unless it involves a threshold harm (serious bodily injury), turn to you insurance
company for money.

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a. Forms of “No-Fault”
i. Add-On: owners required to purchase certain coverages…lost wages and
medical insurance. No limitation on access to courts…probably the most
prevalent form.
ii. Modified: insurance is optional, access to courts allowed only is threshold
amount is reached
iii. Pure: insurance is required…access to courts only allowed where injury
involves a serious bodily injury/impairment. Best described as “Your Fault”
insurance
_____________________________________________________________________________________
WRONGFUL DEATH & SURVIVOR STATUTES

1. Wrongful Death, Distinguished from Survivor: Most states have two types of statutes taking
effect when personal injury victim dies. Survival statute governs whether the victim’s own right
of recovery continues after death. Wrongful death statute governs the right of victim’s survivors
(e.g. spouse & children) to recover.
a. Wrongful Death Statutes: when death has been wrongful, most states have statutes
allowing a defined group of people to recover their pecuniary loss. Typically spouse or
children can recover. If no spouse or children, often parents can recover (stepchildren
usually are not considered beneficiaries).
i. Recovery
1. Loss of Financial Support: even accounts for the trickle-down effect,
example, an uncle promising to pay for your education.
2. Loss of Companionship: includes the loss of society, comfort, and
companionship the family suffers (extends to minors, see Selders v.
Armentrout).
3. Reasonable Funeral Expenses: in circumstances where the decedent’s
dependents have either paid for the funeral or are liable for its payment
ii. Beneficiaries (Varies depending on jurisdiction)
1. Spouse: the cases have been consistent in refusing to extend the
definition of spouse to unmarried cohabitants.
2. Domestic Partnership: several jurisdictions have made wrongful death
benefits available to domestic partners.
iii. Tort Law
1. Derivative claim
2. Still must prove the loss, whether it be financial or companionship
3. Almost half of the statutes have caps on speculative damages
4. Little over half the states allow punitive damages for wrongful death
b. Survival Statutes: Survival statute in most states says that when an accident victim dies,
his estate may sue for those elements of damages that the victim himself could have sued
for had he lived. Thus, these typically allow suing for pain and suffering, lost earnings
prior to death, actual medical expenses, etc. (see Murphy v. Martin Oil Co.)
i. Common Law: all rights and tort liabilities terminated upon death. Thus, if
victim or tortfeasor died prior to suit, no cause of action could be brought.
Because of this harsh result, states have enacted survival statutes.
ii. Instantaneous Death: in many states, if death is instantaneous, there is no survival
action because all damages are sustained after death. But might be able to
recover for pain and suffering pre-death (the conscious awareness of impending
death).
iii. Recovery: diminished if a beneficiary was contributorily negligent

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_____________________________________________________________________________________
STATUTE OF LIMITATIONS AND REPOSE
1. Statute of Limitations: period of time for the plaintiff to bring an action (statute at the benefit of
the defendant) typically start to runs at the time of the injury/negligent conduct.
a. Discovery of Injury: if P does not discover his injury until long after D’s negligent act
occurred, the statute of limitations may not start to run until P discovered (or ought to
have discovered) the injury [with reasonable diligence]
b. Medical Malpractice—SOL for medical malpractice typically one (1) year
i. Discovery (Majority) Rule—a cause of action for medical malpractice does not
accrue until the injured party discovers or should have discovered the injury
ii. Limitation (Statute of Repose): cap the time period at 5 years from the event that
gave rise to the cause of action.
2. Statute of Repose: limits potential liability by limiting the time during which a cause of action
can arise (not dependent on any type of injury/harm)
a. Product Liability: starts to run when product is made available for sale
b. Professional Services: starts to run when the service was rendered
3. Tolling—tolling may also stop the running of time if P is a minor or incompetent or D
fraudulently conceals the presence of a cause of action
_____________________________________________________________________________________
IMMUNITIES (affirmative defenses)—requires compelling societal justifications
1. Inter-Spousal Immunity—at common law, inter-spousal immunity prevented suits by one
spouse against the other for personal injury (they were considered one single entity).
a. Abolition of Rule—over half of the states have completely abolished this immunity (see
Freehe v. Freehe).
2. Parent-Child Immunity—at common law, there is immunity that bars suit by child against
parents or vice versa. Many states have abolished this rule as well (see Renko v. McLean).
a. Availability of liability insurance affects whether or not immunity is recognized
b. Child can sue the parents when the child has reached the age of majority
3. Charities—at common law, charitable organizations, as well as educational and religious ones,
receive immunity—compelling reasons: (1) diversion of funds outside the donor’s intent, (2) law
should not hold non-profit entities vicariously liable, (3) beneficiary assumed the risks, (4)
donations to charities would greatly diminish should charities be held liable.
a. Abolition of Rule—more than 30 states have abolished charitable immunity and others
have cut back on it (these organizations can purchase liability insurance).
b. Abernathy v. Sisters of St. Mary’s—non-government charitable institutions are liable for
their own negligence and the negligence of their employees.
4. Employer Immunity—SEE WORKER COMPENSATION NOTES
5. State and Local Governments—immunity may be waived
a. Public Duty—police officers do not owe a duty to any single individual, but to society in
general (see Riss)
i. But, duty created with 911 emergency response system AND operator responded
that help was on the way (caller now relies on police). Both factors create the
duty.
b. Congress abrogates (overrides) State sovereign immunity, SEE MORE BELOW
i. Four Requirements (only addressed 2):
1. Plain Statement Rule—Whether Congress has “unequivocally
expressed its intent to abrogate the immunity”
a. Ex. “In any suit under this law, the state shall not bring
sovereign immunity”

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2. Valid Source of Constitutional Authority—Whether Congress has

acted pursuant to a valid exercise of power
a. Cannot abrogate pursuant to Article 1 (i.e. not Commerce
Clause, Spending, Taxing)
b. Can only abrogate pursuant to 13th, 14th, 15th Amendments, why?
11th Amendment came after the text of the Constitution.
Reconstruction Amendments came after 11th Amendment.
3. Congress Must Demonstrate a Pattern or Practice of Discrimination
by the States Against Whatever Right the Federal Law Aims to
Protect
a. Congress documents pattern by holding hearings
4. Law Created to Protect Right Must be Congruent and Proportional
to the Harm Congress has Identified—
a. Ex. Voting Rights Act 1965, §5: preclearance requirement…if a
state is subject to requirement, then before that state can make
any change to voting rights law/regulations, must first preclear
with Justice Dept or Federal Court.
c. Ex Parte Young (1908)—CRITICAL DECISION, state officials can be sued in an action
for prospective injunctive relief (equitable relief) or for monetary relief (legal relief)
provided that it comes from the officer, not the state treasury. The State of Minnesota has
created an unconstitutional state law (tariff law), violation of 14th Amendment Equal
Protection; sue the Attorney General for injunctive relief.
i. To Get Injunction—Substantial likelihood of success on the merits to get
injunctive relief
ii. Stripping Doctrine—when a state official attempts to enforce an unconstitutional
state law, that person is stripped of authority to act on behalf of the state, i.e. not
acting as a state official, but only acting in individual capacity.
iii. Make it possible for individuals to challenge unconstitutional state laws.
iv. SCOPE OF RELIEF (Edelman v. Jordan)—past monetary dues (i.e.
DAMAGES) are NOT recoverable from the State, only prospective relief.
1. Ancillary Relief Doctrine: if state is going to have to pay money for
prospective relief, that is okay. But, past due/retrospective dues are not
recoverable.
6. The United States (Federal Government)—immunity may be waived
a. Immune for non-ministerial acts
i. Non-ministerial acts are those not required by law…i.e. ones for which the actor
has discretion
b. In theory, the federal government can be sued if a private person could have also been
sued
c. The Federal Tort Claims Act
i. Filed in federal district court
ii. Only allowed bench trial
iii. Attorney’s fees are limited (limits lawsuits brought in the first place)
7. Public Officers—immune when acting within official capacity
a. Absolute Immunity—absolutely immune, higher ranking federal official
i. Ex. The President of the United States
b. Qualified Immunity—limitations to immunity, with regard to discretionary acts. If law
mandated that you act in a particular way, and you fail to act according the what was
mandated, you are not immune.
i. Non-discretionary (ministerial) Actions—not immune

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_____________________________________________________________________________________
VICARIOUS LIABILITY (holding another liable regardless of any involvement or fault because of a
relationship with the individual that may be at fault, GO FOR THE DEEPER POCKETS)
1. Respondeat Superior Doctrine—“look to the person higher up”
a. Employer-Employee: employer’s vicarious liability may extend to willful and malicious
torts of an employee as well as negligent conduct of the employee while working within
the course/scope of employment
i. Course/Scope of Employment—when employee is performing services for which
he has been employed, or when he is doing anything which is reasonably
incidental to his employment [courts have been liberal in this aspect]
1. “Going-and-Coming Rule”—doctrine does not include an employee’s
daily commute
a. EXCEPTION (Minority): when an employee endangers others
with a risk arising from or related to work, then the employer is
liable
i. Test: general foreseeability
ii. Ex. Employee exposed to dangerous chemicals at work,
gets into accident on ride home. (See Bussard v.
Minimed, Inc.)
1. What if the employee was fired from work, and
gets into an accident because he was frustrated
and upset?
2. “Slight-Deviation Rule”—was the slight deviation (detour) fairly
foreseen/sufficiently related to the employment to fall within the scope,
or a substantial deviation (frolic) from or an abandonment of the
employment.
a. FACTORS (not exhaustive):
i. The employee’s intent (was it to further the employer’s
business purpose)
ii. Nature, time, and place of the deviation
iii. The time consumed in the deviation
iv. The work for which the employee was hired
v. The incidental acts reasonably expected by the employer
vi. The freedom allowed the employee in performing his job
responsibilities
b. Court inclined that the employee was working with scope
because more money now available to the plaintiff
2. Independent Contractors—one performing a certain service for another according to his own
methods and manner, free from control and direction of his employer in all matters connected
with the performance of the service except as to the result thereof.
a. No General Liability—one who hires an independent contractor is not generally liable for
the torts of that person (see Murrel v. Goertz).
i. Distinguish—different theories for going after the principal as well as the
independent contractor: the negligence in hiring/retention and based on the duty
being non-delegable.
b. EXCEPTIONS
i. Absolute Duties—there are some duties deemed so important that the person
doing them will not be allowed to delegate them to anyone (see Maloney v. Rath,
D, driver, hit P because brakes were negligently repaired by X. Driver could not
delegate to X the duty to keep her brakes in good working order).

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1. Mechanic only has a duty to the lady for the service

c. Will NOT ASK ON EXAM to know if duty is non-delegable, just KNOW THE RESULT
3. Joint Enterprise—(a.k.a. joint venture) the burden of establishing the existence of a joint venture
is upon the party asserting that the relationship exists.
a. Elements (Rest.2d)
i. An agreement, express or implied, among the members of the group
ii. Common purpose to be carried out by the group
iii. A community of pecuniary (financial) interest in that purpose, among the
members, AND
iv. An equal right to a voice in the direction of the enterprise, which gives an equal
right of control
b. Class Definition: Mutual right to control and common pecuniary interest, as opposed to
an existing association between the parties are the two most compelling justifications for
imposing liability on the enterprise
4. Bailments—
a. Owner Consent Statutes: impose liability on the owner of vehicles for injuries that are
sustained while being used with the owner’s consent; with the law strongly presuming
that the use of the vehicle was consented
i. In Shuck v. Means, consent goes to the vehicle being driven not consent to the
particular driver. The particular driver need not be known and his driving
consented to by the owner.
1. Thus Hertz is liable when they’ve consent to their car being driven,
regardless of who is driving.
ii. See the FUTURE CASES: boyfriend, roommate.
_____________________________________________________________________________________
STRICT LIABILITY—the defendant must pay damages although the defendant neither intentionally
acted nor failed to exercise the objective standard of reasonable care of negligence. (Strict liability is
sometimes referred to as “absolute liability” and is a Question of Law)
1. Animals
a. Trespassing Animals: owner is liable when his animals trespass upon the P’s land
i. Dogs and cats are NOT included
b. Wild Animals (Animals Ferae Naturae): owner or possessor of a nondomesticated
animal is subject to strict liability if the animal injured anyone
c. Domestic Animals: if the owner knows, or has reason to know, that a domestic animal
has vicious propensities, this is sufficient to classify that animal with wild ones and thus
impose strict liability
i. One-Bite Rule: if there is no reason to know prior to the first bite that the animal
has vicious tendencies, owner is not liable  first bite creates NOTICE that the
animal has vicious tendencies.
2. Abnormally Dangerous Activities—liability is imposed regardless of whether someone acted
reasonably if the harm results from the defendant’s participation in an abnormally dangerous
activity.
a. Factors for Consideration (Rest.2d §520)
i. Existence of a high degree of risk of some harm to the person, land or chattels of
others;
ii. Likelihood that the harm that results from it will be great (magnitude);
iii. Inability to eliminate the risk by the exercise of reasonable care; if the injury
could have been avoided through the exercise of reasonable care  not
abnormally dangerous (KNOW);
iv. Extent to which the activity is not a matter of common usage;

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v. Inappropriateness of the activity to the place where it is carried on; and

vi. Extent to which its value to the community is outweighed by its dangerous
attributes (public policy balancing)
b. Ex. Shooting Range not an abnormally dangerous activity
c. Ex. Dynamiting might be dangerous in city but not rural areas.
d. Examples of Dangerous Activity
i. Transportation and storage of toxic chemicals and inflammable liquids
ii. Pile driving
iii. Crop dusting
iv. Fumigation with toxic gases
v. Testing of rockets
vi. Fireworks displays
vii. Operation of hazardous waste disposal site
viii. Operation of oil wells
ix. Storage of large quantities of water and other liquids
3. Limitations on Strict Liability
a. Contributory Negligence NOT a defense, i.e. does not bar recovery for P in Strict
Liability claims
i. Adopt pure comparative fault in strict liability cases
b. Animals
i. If a person with full knowledge of the evil propensities of an animal wantonly
excites him, or voluntarily and unnecessarily puts himself in the way of such an
animal, he would be adjudged to have brought the injury upon himself, and ought
not be entitle to recover (see Sandy v. Bushey).
c. Abnormally Dangerous Activities
i. Was the harm foreseeable—FORESEEABILITY TEST?
ii. RULE—type of harm that we expect to be associated with the activity
1. If YES, liable
a. Vibrations, debris
2. If NO, not liable
a. Nervous disposition of pet mink doesn’t make “blasting”
ultrahazardous (see Foster v. Preston Mill Co.)
_____________________________________________________________________________________
JOINT TORTFEASORS
1. Liability and Joinder of Defendants—either of two persons whose concurrent negligence
contributed to cause plaintiff’s injury and damages may be held liable for the entire amount of the
damages caused by them.
a. “Joint and Several Liability”—means that each of several tortfeasors is liable jointly
with the others for the amount of the judgment against them, and that each is also
individually liable for the full amount. P can collect from any one of them or any group.
i. Right to Contribution—Joint tortfeasor can go after the other joint tortfeasor to
recover some amount of the damages awarded, ONLY WHEN ONE D PAYS
MORE THAN HIS FAIR SHARE.
1. Ex. Two parties engaged in street racing, where one party caused injury
to P, P may recover from one or both parties engaged in the racing (the
other racer induced or encouraged the tort) (see Bierczynski v. Rogers).
ii. Non-Delegable Duty—NOTE 7 & pg. 364
b. Some Jurisdictions: (Pure) Comparative Fault—a concurrent tortfeasor is only liable
in damages for their % of fault [abandoned the theory of “joint and several liability”]

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i. Ex. D1 (unknown) is 70% at fault, while D2 (known) is 30% at fault; if P sues

D2, and D2 is a concurrent tortfeasor, P can only recover 30% in damages from
D2 (see Bartlett v. New Mexico Welding Supply, Inc.).
ii. Why Abolish? No Right to Contribution when the other joint tortfeasor is
unknown to the other joint tortfeasor.
c. When one of the Joint Tortfeasors is Immune—no right to contribution.
i. Ex. P – 20%, D1 (employer) – 40%, D2 – 40%  P gets workers compensation
from D1, and D1 is immune for other liability. D2 has no right of contribution
from D1 when sued by P.
1. Some jurisdiction say D2 is now 80%
2. Some jurisdiction say D2 is only 40%
2. Satisfaction and Release (see Bundt)
a. Ex. P – 10%, D1 – 10%, D2 – 50%, D3 – 30%
i. What’s D1’s liability?
1. Under Pure Comparative: D1 liable for 10%
2. Under Modified (less than) Comparative: D1 not liable
3. Under Modified (not greater than) Comparative: D1 is liable for 10%
ii. If P settles with D1 for some $…
1. 10% of P’s case is settled no matter how much $ P gets
2. D2 and D3 still on the hook for their %
a. Their individual % depends on joint and several/comparative…
b. Pro Tanto Reduction—Non-settling defendants get a credit for the other settlement
i. Total Recovery is $100K – %10K for P’s negligence
ii. If P settles with D1 for $5K
iii. D2 and D3 still on the hook for $85K
c. Pro Rata Reduction (favored)—proportional settlement.
d. RELEASE—???
3. Contribution and Indemnity
a. See Knell—Rules of civil procedure allow for defendants to bring third party actions
against defendants who may be partially or totally responsible for plaintiff’s injuries. It
essentially lays the legal predicate for the right to contribution and of course encourages
settlements.
b. See Yellow Cab—cannot bring an immune party as a third party action by the other
defendant [protected from direct and indirect claims]
c. See Slocum—courts prefer settlements and fashion their rules regarding settlements and
the right to contribution accordingly.
i. Contribution—arises as against the tortfeasor who fails to pay her fair share
ii. Indemnity—arises where, because of relationships, one party is charged with
liability for the acts of another
4. Apportionment of Damages HAS NEVER BEEN ASKED ON THE EXAM
a. See Bruckman—responsibility is on the defendant to apportion damages
_____________________________________________________________________________________
PRODUCTS LIABILITY—products liability is when a seller is liable for injuries that a defect causes to
its purchaser, user, or sometimes bystanders.
THEORIES OF RECOVERY
1. Negligence—ordinary negligence principles apply to a case in which personal injury is caused by
a carelessly manufactured product.
a. Remote Purchasers—one who negligently manufactures a product is liable for any
personal injuries proximately caused by his negligence.

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i. See MacPherson v. Buick Motor Co.—a manufacturer of any product owes a

duty of care to remote purchasers if the product is likely to cause injury if
negligently made.
b. Bystanders—can recover under negligence if it was “foreseeable”
c. Rationale for Negligence Standard p.746 (see below under Design Defects Notes)
2. Warranty—a buyer of goods that are not as they are contracted to be may bring an action for
breach of warranty. [The law of warranty is mainly embodied in the UCC]
a. Express Warranties—a seller may expressly represent that their goods have certain
qualities. If the goods turn out not to have these qualities, the purchaser may sue for this
breach of warranty.
i. Common Law: Caveat Emptor—traditionally, action for breach of express
warranties required privity. Caveat emptor (buyer beware) applied, safeguarding
manufacturers from liability
ii. UCC §2-313—an express warranty can arise by…
1. A statement of fact or promise about the goods;
a. See Baxter v. Ford Motor Co., dealer and manufacturer promised
“shatterproof” glass. The glass shattered causing injury to P’s
eye. P sued D for breach of the express warranty that the glass
would be shatterproof).
2. A description of the goods; AND
3. The use of a sample or model
iii. Strict Liability—breach of express warranty acts kind of like strict liability—as
long as P can show a statement of fact was false, it doesn’t matter if D believed it
to be true or even if D could not possibility have known that it was untrue.
b. Implied Warranties—existence of a warranty as to the quality of goods can also be
implied from the fact that the seller has offered the goods for sale.
i. Warranty of Merchantability: UCC §2-314—a warranty that goods shall be
merchantable is implied in a contract for their sale if the seller is a merchant with
respect to the goods of that kind.
1. Merchantable—“fit” for ordinary purposes for which such goods are
used
2. Merchant—seller must be in the business of selling the kind of goods in
question, or due to profession has unique knowledge of the goods.
ii. Fitness for Particular Purpose: UCC §2-315—
c. Why Warranties Over Strict Liability?
i. Pure Economic Harm—P usually does better under warranty theory than strict
liability
ii. Statute of Limitations—usually shorter for strict liability, so sometimes warranty
is all that is left.
3. Strict Liability—in general, almost all states apply the doctrine of “strict product liability.”
Seller of products is liable without fault for personal injuries caused by product if it was sold in a
defective condition.
a. Rationale for Strict Liability (KNOW FOR EXAM) (see pg. 737)
i. Consumer finds it too difficult to prove negligence against the manufacturer
ii. Reputable manufacturers stand behind their products; and many of them issue
express agreements to replace or repair defective products. Therefore, all should
be responsible when an injury results from a normal use of the product.
iii. Manufacturer is in a better position to protect against harm, by insuring against
liability for it, and, by adding the cost of the insurance to the price of the product,
to pass the loss on to the general public.
iv. The warranty process is time-consuming, expensive, and wasteful.

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v. Distributors and retailers are no more than a conduit, a mechanical device

through which the thing sold reaches the consumer.
vi. Costs of accidents should be placed on the party best able to determine whether
there are means to prevent accidents.
b. Greenman v. Yuba Power Products, Inc.—regardless of whether any express or implied
warranties were made, manufacturer is liable when…
i. The product is defective,
ii. The product is used as intended,
iii. The product causes injury, AND
iv. The manufacturer knew the product would be used without inspection by user
c. Non-Manufacturers—strict liability applies also to retailers that are in the business of
selling such products

-------------------------------------------------------------------------------------------------------------------------------

PRODUCT DEFECTS: it is not the product that caused the injury, but the defect.
Restatement Second of Torts, § 402 (a) [with Dotson modifications]
1. One who sells any product in a defective condition unreasonably dangerous to the user or
consumer or to his property is subject to liability for physical harm thereby caused to the ultimate
user or consumer, or to his property, if
a. the seller is engaged in the business of selling such a product
2. The rule stated in Subsection (1) applies although
a. the seller has exercised all possible care in the preparation and sale of his product (i.e.
Strict Liability)
Comments:
f. Business of selling. The rule stated in this Section applies to any person engaged in the business of
selling products for use or consumption. It therefore applies to any manufacturer of such a product, to any
wholesale or retail dealer or distributor, and to the operator of a restaurant. It is not necessary that the
seller be engaged solely in the business of selling such products. Thus the rule applies to the owner of a
motion picture theatre who sells popcorn or ice cream, either for consumption on the premises or in
packages to be taken home. The rule does not, however, apply to the occasional seller of food or other
such products who is not engaged in that activity as a part of his business.

g. Defective condition. The rule stated in this Section applies only where the product is, at the time it
leaves the seller's hands, in a condition not contemplated by the ultimate consumer, which will be
unreasonably dangerous to him. The seller is not liable when he delivers the product in a safe condition,
and subsequent mishandling or other causes make it harmful by the time it is consumed. The burden of
proof that the product was in a defective condition at the time that it left the hands of the particular seller
is upon the injured plaintiff; and unless evidence can be produced which will support the conclusion that
it was then defective, the burden is not sustained.

Safe condition at the time of delivery by the seller will, however, include proper packaging, necessary
sterilization, and other precautions required to permit the product to remain safe for a normal length
of time when handled in a normal manner.

i. Unreasonably dangerous. The rule stated in this Section applies only where the defective condition of
the product makes it unreasonably dangerous to the user or consumer. Many products cannot possibly be
made entirely safe for all consumption, and any food or drug necessarily involves some risk of harm, if
only from over-consumption. Ordinary sugar is a deadly poison to diabetics, and castor oil found use
under Mussolini as an instrument of torture. That is not what is meant by “unreasonably dangerous” in
this Section. The article sold must be dangerous to an extent beyond that which would be contemplated by

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the ordinary consumer who purchases it, with the ordinary knowledge common to the community as to its
characteristics. Good whiskey is not unreasonably dangerous merely because it will make some people
drunk, and is especially dangerous to alcoholics; but bad whiskey, containing a dangerous amount of fuel
oil, is unreasonably dangerous. Good tobacco is not unreasonably dangerous merely because the effects of
smoking may be harmful; but tobacco containing something like marijuana may be unreasonably
dangerous. Good butter is not unreasonably dangerous merely because, if such be the case, it deposits
cholesterol in the arteries and leads to heart attacks; but bad butter, contaminated with poisonous fish oil,
is unreasonably dangerous.

j. Where warning is given, the seller may reasonably assume that it will be read and heeded; and a product
bearing such a warning, which is safe for use if it is followed, is not in defective condition, nor is it
unreasonably dangerous.

TYPES OF DEFECTS/CLASS TESTS FOR DEFECTS

1. Manufacturing Defects—imperfections that inevitably occur in a typically small percentage of
products of a given design as a result of the fallibility of the manufacturing process
a. Ask: whether the product was flawed or defective because it was not constructed
correctly by the manufacturer
i. P doesn’t need to show what actions in the assembly line caused the defect.
b. Dispute: over the timing of the product’s defective
i. Can introduce evidence of D’s taking all possible care in manufacturing process
not for reasonableness, but regarding the timing of the defect
ii. Settle the lawsuit if it was a manufacturing defect
c. Comparison Test (Dominate/Class Test): “look at it”, compare the defective product
with the same product [in either a strict liability or negligence jurisdiction]
d. Consumer-Expectation Test: see §402(a), comment i, “The article sold must be
dangerous to an extent beyond that which would be contemplated by the ordinary
consumer who purchases it, with the ordinary knowledge common to the community as
to its characteristics”
2. Design Defects
a. Some jurisdiction take negligence approach/others take strict liability
i. Rationale for Negligence Standard (p.746)
1. Plaintiff can learn of deliberate and documentable design defects through
access to expert witnesses and technical data
2. Encourage the design of safer products by rewarding careful
manufacturer and penalize the careless
3. Higher threshold of fault test when threatening an entire product line
4. Intrinsic fairness
b. Reasonable Alternative Design: Most jurisdictions require that the plaintiff prove an
alternative feasible design in order to prove design defect
c. Risk-Utility Test (Strict Liability/Class Test)—
i. Risks of current design in regard to…
1. Frequency (how often people are injured), and
2. Magnitude (severity of the injuries)
ii. Utility of current design (value/benefit of product as-is)
iii. Risks associated with alternative design
1. May prevent but replace one kind of injury with a new kind of injury
iv. Utility of alternative design
1. Social value/interest in new design
v. Burden on manufacturer to make product safe

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1. I.e. how much is it going to cost to make product safer

d. How to distinguish between negligence and strict liability in design cases?
i. Strict Liability focuses on product TODAY: is the product defective TODAY;
risks and utility of the product TODAY
ii. Negligence looks back to when manufacturer acted: did the manufacturer act
reasonably?
iii. Example: Asbestos
1. Negligence: Did you act reasonably when you made asbestos back in the
day?
2. Strict Liability: is asbestos defective TODAY?
iv. Is it fair to hold manufacturer liable when they did not know that at the time the
product was defective despite the reasonableness? YES, under strict liability
e. State of the Art: defendant avoid liability by showing compliance with the “state of the
art”  the best scientific and medical technology that is practically and economically
feasible, i.e. “The Best”,
i. Question: when was it the best?
1. Strict Liability: must be the best TODAY
2. Negligence: must be the best when the product was made
f. Applicability to Prescription Drugs and Medical Devices: see §402(a) comment k:
most jurisdictions have declined to apply true strict liability to the design of prescription
drugs (“unavoidably unsafe products”), i.e. NO STRICT LIABILITY FOR DESIGN
DEFECTS IN PRESCRIPTION DRUGS.
g. Applicability to Food: two tests…
i. Consumer Expectation Test (same as above)
ii. Foreign-Natural Test: is the alleged defect natural to the food product, or is it
foreign?
1. If it is natural, then no liability
a. Ex. Shell in pecan pie, natural, not liable; Cockroach in food, not
natural, liable.
3. Failure to Warn—no duty to warn if the risk was obvious; A manufacturer of a product, which
the manufacturer knows or should know is dangerous by nature or is in a dangerous condition, is
under a duty to give warning of those dangers to persons who it is foreseeable will come in
contact with, and consequently be endangered by, that product [Question of Fact]…DO NOT
IMPOSE STRICT LIABILITY IN WARNING CASES (despite the language of the law in a
particular jurisdiction)
a. Test—Was the warning adequate + CET Test for Unreasonableness
i. What makes a warning adequate? Label clutter lends to little or nothing being
conveyed [risk awareness]
1. Process: how was the risk conveyed
a. Lettering employed
b. Warning placement
c. Attention grabbing
2. Substance: risk identified?
a. Instruction on how to avoid?
b. Instruction on what to do is risk encountered
ii. Consumer-Expectation Test: see §402(a), comment i, “The article sold must be
dangerous to an extent beyond that which would be contemplated by the ordinary
consumer who purchases it, with the ordinary knowledge common to the
community as to its characteristics”

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b. “State of the Art” in Warning Cases (Knowledge): Evidence that the particular risk
was known by the application of scientific knowledge at the time of manufacture and/or
distribution.
c. Methods to make the liability “Strict”
i. If Defect Warning: Hold everyone in chain of distribution liable regardless of
negligence
ii. Ask only is risk was known and whether it was warned of adequately
iii. Ask only if risk presented itself regardless of whether the science was aware…
d. Allergic Reactions/Hypersensitivity—goes to the central question  when to warn?
i. Look at the numbers as a starting point; how many people are affected?
ii. How serious are the reactions?
e. Learned Intermediary (Minority) Rule—MacDonald v. Ortho Pharmaceutical. If the
prescribing physician is acting as a learned intermediary between the manufacturer and
the consumer, then the manufacturer’s duty is to warn the doctor, rather than the patient,
although the manufacturer is directly liable to the patient for a breach of such a duty [not
limited to just doctors]
i. Policy—Learned intermediary might know the individual using the product
better than the manufacturer. Impracticable to warn the user directly.
ii. LIFE-STYLE EXCEPTION: a peculiar characteristic that may create a common
law duty on the manufacturer to warn the user of the product
1. “Lifestyle Drugs”, not medically required (consumer is the one making
the choice).
a. Ex. Birth-control
iii. Advertising Directly to the Consumer  manufacturers have now changed the
landscape for the learned intermediary rule
1. Doctors are now dispensers, NOT learned intermediary
f. Rebuttable Presumption—that had an adequate warning been provided, the plaintiff
would have heeded the warning.
i. Rebut—had the injured party not even read the warning
ii. Adequacy is for the jury to decide
g. SEE 402(a) comment j. Where warning is given, the seller may reasonably assume that it
will be read and heeded; and a product bearing such a warning, which is safe for use if it
is followed, is not in defective condition, nor is it unreasonably dangerous.
ADDITIONAL NOTES
 JUST BECAUSE YOU HAVE REASONABLY AND ADEQUATELY WARNED
DOES NOT MEAN THAT YOU MIGHT NOT BE LIABLE FOR PRODUCT DEFECT
 DESIGN ISSUE, IF YOU COULD HAVE MADE THE PRODUCT SAFER.
 Typical evidentiary tool in DESIGN and WARNING cases –Introduce evidence of prior
accidents involving the allegedly defect product but ONLY if the prior accidents are
substantially similar to the instant case
 PUNITIVE DAMAGES: Wonderful tool for establishing malice as well
4. Subsequent Remedial Measures (KNOW)—measures taken after an event, that if previously
taken would have made the event less likely to occur
a. Federal Rule of Evidence 407—evidence of subsequent remedial measures is NOT
admissible to prove negligence of culpable conduct in connection with the event.
i. May be admissible if offered for another purpose:
1. Proving ownership, control or feasibility of precautionary measure, if
controverted, or impeachment.
5. Proof
a. Friedman v. GM, do not know if the condition existed before or after the accident.

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i. Sometimes must turn to CIRCUMSTANTIAL EVIDENCE

6. Defenses
a. Most jurisdictions allow comparative fault even in strict liability products liability cases
i. Cons of considering plaintiff’s contribution
1. Apples and Oranges
2. Strict Liability promotes recovery and gives the requisite incentive to
make safe products
ii. Pros
1. Defendant is not insurer of product
2. Comparative fault rules
3. Unfairness in allowing plaintiff’s conduct to go unexamined
b. Unforeseeable Misuse
i. Manufacturer is not liable for injuries resulting from abnormal use of the product,
unless the misuse was foreseeable (SEE SLIDES FOR ADDITIONAL NOTES).
c. (PREEMPTION NOT ON EXAM)
7. TOPIC 1 IN HANDOUT
a. §4 Compliance with Product Safety Statutes or Regulations—in connection with
liability for defective design or inadequate instructions or warnings:
i. Just because compliance with government or industry standard does not mean
product not defective
1. States and juries can require more than mere compliance with above
ii. Minority Jurisdictions—like Michigan, compliance creates rebuttable
presumption that the product is not defective
b. §8 Liability of Commercial Seller or Distributor of Defective USED Products—a
used product is a product that, prior to the time of sale of other distributions referred to in
this Section, is commercially sold or otherwise distributed to a buyer not in the
commercial chain of distribution and used for some period of time.
i. Policy Reasons That Disfavor Strict Liability See Peterson v. Lou Bachrodt
1. Not strictly liable because the seller of used products does not have the
relationship with the manufacturer as those in the change of distribution
2. Judgments increase price of product making purchases cost prohibitive
3. Product often sold “as is” so little room for misrepresenting
ii. SEE Topic One sec 8 and notes 5, 7
1. OCCASIONAL SELLER  NO STRICT LIABILITY
2. Indemnity and Contribution 
c. Hybrid Approach: Is the party in the business of providing products or business of
providing services…what is the prominent/primary purpose of defendant’s contribution:
product or service?
i. Business of providing service  NOT strict liability, but negligence
1. Example: Hospital and Pacemakers  hospital provides service, thus
not strict liability
_____________________________________________________________________________________
DEFAMATION
NATURE AND ELEMENTS FOR A CLAIM OF DEFAMATION
1. Common Law Elements (material presumed to be false)
a. Material conveyed must be “defamatory”
i. Standard—A statement is defamatory if it has the potential for causing harm to
the plaintiff’s reputation (subject to scorn, ridicule, disassociation) within a
substantial yet respectable segment of the community (i.e. by respectable
community standards; also, not majority vote)

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1. Question of law whether utterances could arouse scorn, ridicule, etc.

2. Question of fact whether utterance did arouse scorn, ridicule, etc.
ii. Who Can Be Defamed?
1. Any living person; including young children, ex. being called a “bastard”
2. Dead people cannot be defamed
3. Corporations—typically no reputation in the personal sense. Can
maintain an action for defamation that casts an aspersion upon its
honesty, credit, efficiency, or other business or moral character.
b. Material must be “published” by the defendant
i. Publication—means merely communication of the defamatory words to someone
other than the person defamed, who understood the statement. It is not enough
that the words are spoken to the plaintiff himself, even in the presence of others,
if no one else overhears them (see Economopoulos v. A.G. Pollard Co.).
1. Failure to Remove Defamatory Material—constitutes publication
2. Original publisher is liable for damages due to a repetition that might be
reasonably have been anticipated [reasonably foreseen]
3. The party repeating the defamation is himself liable for its publication,
even though he states the source.
4. 47 USC §230(c)(1)—grants immunity to interactive computer service
when information is provided by another information content provider
(see Carafano v. Metrosplash.com, Inc.)
c. Material must “concern” the plaintiff
i. Would a reasonable listener construe the statements as speaking to any particular
person?
ii. Defamation of Groups (see Neiman-Marcus v. Lait)
1. Where the group or class libeled is large, none can sue even though the
language used is inclusive
2. Where the group or class libeled is small, and each and every member of
the group or class is referred to, then any individual member can sue
d. Pecuniary loss, required for Slander and Libel Per Quod
i. Economic damage that is actually suffered, not presumed by law.
2. Pleading Devices—example  “P.D. plays in snow”
a. Colloquium—a formal allegation that the words were spoken of and concerning P.
i. P.D. means Prof. Dotson
b. Extrinsic facts—
i. Snow = cocaine
c. Inducement—along with extrinsic facts  words were reasonably understood to convey
a meaning defaming P.
i. Plays in snow = snorts cocaine
d. Innuendo—an allegation of the particular defamatory meaning conveyed by the words.
i. P.D. plays in the snow = Prof. Dotson snorts cocaine
SLANDER AND LIBEL: DEFINED AND DISTINGUISHED
1. Slander—consists of the publication of defamatory matter by spoken words (oral), transitory
gestures, or by any form of communication other than those stated for libel.
a. Plaintiff must show special damages that are the natural, immediate and legal
consequence of the words [special damages are pecuniary damages actually suffered and
not presumed by law].
i. Exceptions (i.e. Slander Per Se)—(special damages presumed if…)
1. Imputations of Major Crimes—D charges that P committed a morally
reprehensible crime, or that P has been incarcerated for such a crime.

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2. Loathsome Disease—D imputes to P a presently existing communicable

disease (e.g. STIs/AIDS).
3. Conduct Incompatible With Business, Trade, Profession, or Office—D
imputes to P conduct, association or characteristics incompatible with
proper performance of P’s business, trade, etc.
4. Serious Sexual Misconduct—D imputes unchastity to a female P (some
states extend this to include males and allegations of homosexuality)
ii. ANY AMBIGUITY  NOT SLANDER PER SE
iii. Rest.2d Torts—reflects a trend toward limiting the per se category of slander to
those instances in which the defamatory remark is apparent from the publication
itself without reference to extrinsic facts.
2. Libel—publication of defamatory matter by written or printed words, or by its embodiment in
physical form, or by any other form of communication which has potentially harmful qualities
characteristic of written or printed words. Typically, plaintiff does NOT have to show special
damages/pecuniary harm [it’s presumed, i.e. libel per se, see below]
a. Libel Per Se: A statement is defamatory on its face and the established rule at common
law was that it is not necessary to prove special damages in order to maintain an action
for libel.
b. Libel Per Quod: P must prove special damages and those extrinsic facts in order to have
a cause of action.
3. Borderline cases—consider the permanence of the form, area of dissemination, and deliberate or
premeditated character of the publication.
a. Broadcasting—modern view holds that all television and radio publications are libel, but
state statutes are split. Most jurisdictions hold it as slander (lobbying  “money talks”)
OTHER INFORMATION
1. Statute of Limitations
a. Common Law: every sale or delivery of libelous matter was a new publication and that,
therefore, a new cause of action accrued on each occasion
b. Single Publication Rule (Class/Modern View): cause of action accrues at original
publication (made available for viewing), and the statute of limitations runs from that
date. [ONLY FOR MATERIAL IN PRINT]
1. New Addition of Book – new cause of action
2. New medium of material – NO new cause of action
2. Defenses
a. Consent—complete defense
b. Truth—burden on the defendant to show substantial truth (common law presumption
that the statement is false). Some states impose upon plaintiff the burden of proving
falsity.
BASIS OF LIABILITY
1. Public Figure/Public Official Defamed By Press (speech of public concern)
a. Public Official—the position in government has such apparent importance that the
public has an independent interest in the qualifications and performance of the person
who holds it, beyond the general public interest in the qualifications and performance of
all governmental employees.
b. Public Figure—public figure is one who has thrust themselves to the forefront of
particular public controversies in order to influence the resolution of the issues involved,
statements limited to the persons participation in the controversy.
i. Universal—an individual who may achieve such pervasive fame or notoriety that
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ii. Limited—individual voluntarily injects himself or is drawn into a particular

public controversy and thereby becomes a public figure for a limited range of
issues.
c. The NY Times Test—(see New York Times Co. v. Sullivan), to recover damages for a
defamatory falsehood, plaintiff must…
i. Prove by preponderance of the evidence the 4 elements for defamation; AND
ii. Prove by clear and convincing evidence that the false statement was made with
actual malice—evidenced by…[Subjective Test]
1. Knowledge that the statement was false; OR
2. Made with reckless disregard of whether it was false or not
a. Recklessness may be found where there are obvious reasons to
seriously doubt the veracity of the statement.
 If statement was inherently improbable that only a reckless man would have put them in
circulation  MALICE
 Malice is determined on a case-by-case basis…
o Intent to injure not enough; ignoring journalistic protocol not enough;
publishing for profit alone not enough; failing to investigate alone is not
enough  but in totality, might be malice
2. Private Citizens Defamed by Press (speech of public concern)—unlike a public figure/official
who has greater access to remedying defamation by self-help (channels of effective
communication), a private individual does not, and is more vulnerable to injury, and the state
interest in protecting them is correspondingly greater.
a. The Gertz Test (?)—(see Gertz v. Robert Welch, Inc.) States may define for themselves
the appropriate standard of liability for a publisher or broadcaster of defamatory
falsehood injurious to a private individual [BUT, NO STRICT LIABILITY]
i. A private defamation plaintiff who establishes liability under a less demanding
standard than the NY Times Test may recover only such damages as are
sufficient to compensate him for his actual injury.
1. I.e. actual damages okay without malice, but NO presumed or punitive
damages UNLESS showing of actual malice
ii. Constitution requires at least negligence or malice to recover actual
compensatory damages (i.e. any injury to reputation or emotional distress,
without showing pecuniary loss)
b. “The Fight”  protect reputations, promote recovery; balance with the public interest in
media/speech.
i. States choose Negligence Standard to protect reputations
1. But no punitive damages under this standard
ii. States choose Malice Standard to protect speech
3. Private Defamed by Private (Speech of Private Concern)—it is speech on matters of public
concern that is at the heart of the First Amendment’s protection. Whether speech address a
matter of public concern must be determined by the expression’s content, form, and context.
a. When the defamatory statements do not involve matters of public concern, presumed and
punitive damages ARE permitted absent a showing of “actual malice” (see Dun &
Bradstreet, Inc. v. Greenmoss Builders, Inc.)
4. Falsity
a. Rule—private plaintiff defamed by media, the burden is on the defendant/media to prove
that the statements are true.
5. Opinion
a. Rule—expressions of opinion that imply an assertion of objective fact may be the basis
of a libel action. There is no exception for opinion—can still sue for defamation even
though it was professed as an opinion (see Milkovich v. Lorain Journal Co.)

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i. If the statement is false, but so outrageous that no one will believe it, then there is
NO action for defamation

Case Plaintiff Defendant Speech Matter Damages Fault Falsity

(Type of Publication)

NY Times Public Media Public Concern Any (compensatory; Malice

Official/ actual or presumed)
Figure
Gertz Private Media Public Concern Actual  Negligence OR Malice D must
(as later prove
interpreted by Presumed/Punitive  Malice statements
the courts) true
D&B Private Non-Media Private Any (actual and Malice NOT required
Concern presumed)
EXAM Public Non-Media Private (Any)? Malice/Negligence?
Q? Concern
OLD Public Media Private (Actual)?  Negligence?
EXAM Concern (Punitive)?  Malice?
Q(?)

PRIVILEGES—privilege to make false statements about someone that are defamatory and that may be
made with ill will or malice and not be held liable for the statements
1. Absolute Privilege
a. Judicial Privilege—judges and attorneys has absolute immunity for defamatory words
published in the course of judicial proceedings. The statements must relate to the subject
matter being discussed. Pleadings and witnesses are also protected.
b. Legislative Proceedings—similar privilege is applied to members of Congress and state
legislatures in the performance of their legislative functions. Statements must be related
to the business of the legislature. Also applies to hearings of the legislative body and to
witnesses testifying at those hearings.
c. Federal Public Officials—absolute immunity from suit for defamation as long as the
publication took place with the scope of the official’s office or employment.
d. State Public Officials—also have absolute immunity in the discharge of their official
duties.
2. Qualified Privilege—only lies when…
a. D reasonably believes the accuracy of the information conveyed (even though it is
defamatory); AND
b. D reasonably conveys the information
_____________________________________________________________________________________
PRIVACY
TYPES OF INVASION OF PRIVACY
1. Commercial Appropriation of One’s Name or Likeness (Right of Publicity)
a. Rule—one who appropriates to his own use or benefit the name of likeness of another is
subject to liability to the other for invasion of his privacy
i. Dittmar Elements
1. D used P’s name or likeness;

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2. Use of P’s name or likeness was for D’s own purposes or benefit,
commercially or otherwise;
3. P suffered damages;
4. D caused the damages incurred.
2. Intrusion into One’s Seclusion
a. Rule—physical intrusion upon seclusion or solitude has been recognized as a distinct
form of invasion of privacy [objectively reasonable expectation of privacy?]
i. Intrusion into private place
ii. Method objectively unreasonable
iii. Eavesdropping is invasion; telephone harassment is invasion; taping a phone
conversation is invasion.
iv. Workplace—one lacks a reasonable expectation of complete privacy at the
workplace because the conversation may be overheard by coworkers—but may
have a claim of invasion of privacy by intrusion based on a television reporter’s
covert videotaping of that conversation.
3. “Public Disclosure about Private Facts” that are (A) Highly Offensive to a Reasonable
Person, and (B) Are Not of Legitimate Concern to the Public
a. Rule—disclosure of an embarrassing private fact to only one or just a few person does
not amount to an invasion of privacy. One who intentionally seeks publicity, or puts
himself in the public eye, has not right to complain of publicity that reasonably bears on
his public activity
i. Private Facts (not already in the public)
b. Breach of Confidence
4. “False Light” Invasion of Privacy (similar to defamation)
a. Rule—the media has published false facts or misconstrued the facts about the victim that
causes the public to view the victim in a false light (either better or worse); the statements
must be of public concern, interpreted by a reasonable person as being highly offensive.
i. Malice Required—P must prove that D knew of the falsity or acted with reckless
disregard of it.
ii. Objectively unreasonable false light
_____________________________________________________________________________________
MISREPRESENTATION—instead of recission, sue for damages to recover economic loss.
COMMON LAW ELEMENTS
1. Material Misrepresentation
2. Fraud (lying), Negligence (duty + negligence)
3. Made with intent to have P rely
4. Reasonable reliance
5. Harm = pecuniary loss/economic damages
CONCEALMENT AND NONDISCLOSURE (common law  no duty to disclose)
1. Common Law—no duty to disclose
2. Modern Rule (see Griffith v. Byers Constr. Co. of Kansas, Inc.) Where a vendor has knowledge
of a material defect in property which is not within the fair and reasonable reach of the vendee
and which he could not discover by the exercise of reasonable diligence, the silence and failure of
the vender to disclose the defect in the property constitutes actionable fraudulent concealment
a. Material Defect—the defect is material if a reasonable person would attach importance in
determining his choice of action in the transaction in question.
b. Relationship Between Parties—a fiduciary duty, or superior status of the defendant can
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BASIS OF LIABILITY
1. Fraud/Deceit (see Rest.2d Torts)—a misrepresentation is fraudulent if the maker…
a. At time of misrepresentation, defendant lied and knew it.
i. Unreasonableness may be strong evidence that the defendant’s belief did not
in fact exist.
ii. Bad motive (distinguished from intent to mislead) is not essential to the tort
of deceit.
b. Contributory negligence does not bar recovery when the misrepresentation is
intentional
2. Negligent Misrepresentation—an action for damages for negligent (unreasonable)
misrepresentation will lie where the speaker owes a duty to give correct information.
a. To Determine if a Duty Exists—
i. Was there a serious pre-existing legal relationship (privity)
ii. Was the defendant in the superior position to discern the accuracy of the
information conveyed
iii. Did defendant know specifically how…???
b. Example
i. No duty on book publishers to investigate the accuracy of the contents of the
books it publishes (see Winter v. G.P. Putnam’s Sons)
3. Innocent Misrepresentation—essentially strict liability
a. Majority Rule—no liability for innocent misrepresentation in a tort claim, but would
still have a claim in contract law
b. Minority Rule—an innocent misrepresentation may be actionable if the declarant has
the means of knowing, ought to know, or has the duty of knowing the truth (see
Richard v. A. Waldman and Sons, Inc.).
4. Reliance
a. Rule—a plaintiff cannot recover for misrepresentation unless his reliance upon the
misrepresentation was justifiable. Where the falsity of a statement could have been
discovered through ordinary care is to be determined in light of the intelligence and
experience of the misled individual (see Williams v. Rank & Son Buick, Inc.).
i. Duty on plaintiff to investigate??? “Reasonable” discovery
ii. Reasonableness determined on interest of promoting recovery in case
5. Opinion
a. Rule—actionable misrepresentation must be of an existing fact, not a statement of
opinion. Opinion is not substantial enough for one to reasonably rely upon. Only
statements of fact will induce a reasonable person to rely, thus, only misstatements of
fact are actionable.
i. If the statement is not clear/ambiguous/vague  plaintiff should have done
his homework and due diligence
ii. Courts more likely to find in favor of the plaintiff when a fiduciary is
involved or there is considerable disparity in the bargaining position.
6. Law
a. Rule—usually a representation as to matters of law made by a party on one side of a
transaction could not be relied upon by a party on the other side (see Sorenson v.
Gardner) [unless they come from experts, like lawyers].
i. I.e., seek your own advice…
ii. In Sorenson, statement went to the condition of the building, not what the
law required, thus actionable.
7. Prediction and Intention
a. Prediction Rule—Negligent misrepresentation or deceit must be based on an
“existing” (present or past) fact, not on a prediction of a future fact. However, if one

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can show that D intended to create the impression that the intended future act is a
present fact in the mind of some party  then it is actionable (see McElrath v.
Electric Investment Co.).
i. Prediction similar to a promise
b. Intention Rule—Deceit requires a misstatement of an existing fact, but the promise
to do something, with the present intent to do the contrary is as clear a case of
misrepresentation or fraud as can be made, and the proof of such fraud will not be
precluded by the SOF (see Burgdorfer v. Thielemann).
i. Awareness of defendant that the statement was inaccurate
c. Examples
i. “I will paint your house tomorrow” (with no intention of painting). The
failure to paint house  actionable
ii. “When I paint your house, it will go up in value.” The house doesn’t go up
in value  actionable???
8. Damages—burden on plaintiff to calculate harm, or provide basis to calculate the harm.
a. Two Types of Damages for Misrepresentation
i. Expectation Damages
1. Value of what was promised – value of what was received
2. Example:
a. Cost of new car – the value of the present car
ii. “Out of Pocket Expenses”
1. What paid for the item – value of what received
iii. Replacement Damages
b. A court is more inclined to award damages in cases of fraud (amount sensitive when
it comes to lower misrepresentations  negligence of innocent misrepresentations)

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WILLS, ESTATES, & TRUSTS OUTLINE

Professor Gina Torielli, Hilary Term 2011

Four Underlying Principles Relating to Estate Distribution

1. Courts like to give deference to a property owner’s intent; courts want to honor the property
owner’s intent because the property owner has rights (within limits).
2. The decedent is not available to testify (dead), so there is no expert on his intent.
3. Courts will consider other reliable evidence to determine the decedent’s intent.
a. The most reliable evidence is a person’s will.
b. Beyond that, the court may look outside the will for additional evidence in only
certain situations.
4. Where there is no reliable evidence or the court does not feel confident due to ambiguity in
the will, then the court has to make presumptions. The presumptions will be based on
statutes or
common law.

Difference between a person’s ability to control disposition and use of property during life and after
death
1. During life, a person can do whatever they want with their property.
2. After death, you are more restricted on how you can handle your property.
3. After death you cannot use your property in a manner that violates public policy.
a. Illegal uses of property
b. Uses that amount to waste
i. Example 1—Woman’s will said to tear down the house. By doing this, it
dissipated significantly the value of the property and she gave no good reason
for wanting to do so. The court held that it violated public policy because it
was a waste of money that could go to the estate (see Eyerman).
ii. Example 2—The courts have also held that directing someone to dump their
money into the ocean was a waste; thus, violating public policy.
_____________________________________________________________________________________

DETERMINING THE PROBATE PROCESS

What Goes Into the Estate? (aka probate property)
1. Sole ownership by the decedent
2. Anything he owned as a tenant in common (with no survivorship rights)
Will Substitutes
1. Donatio Causa Mortis (not exactly a will substitute but it acts as one because it takes
property out of the probate estate)—A gift made “in contemplation of death” that is revocable
until the death of the donor and is automatically revoked if the donor recovers from the illness
that prompts the gift. (It is considered an “inter vivos transfer”).
a. Elements
i. Donative Intent
ii. Delivery (constructive/symbolic delivery allowed when manual delivery is
impracticable)
iii. Acceptance by the Donee
iv. Made in Contemplation of Death
1. Must have fear of imminent death; and
2. Must die from the very thing that was feared.
b. NOTE—the fourth element is what sets it apart from a regular gift. The gift will be
enforced if the four above elements are met AND there is clear and convincing evidence.

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If the donor recovers, there must be redelivery when the donee is already in possession of
the gift.
i. CANNOT give up real property on an ORAL disclaimer (Statute of Frauds)
c. In re Van Wormer’s Estate—the decedent suffered from depression and killed himself.
Even though it took several months for him to kill himself, he never recovered from the
depression and the court counted his gifts as gifts causa mortis. Gifts causa mortis can
overrule a will.
2. What Does NOT Go Into the Estate? (aka non-probate property)
a. Life Insurance Policy—If the death benefit is payable to someone other than the deceased
or the estate, it is not part of the probate estate.
b. Joint Tenancy with Survivorship Rights—Your right extinguishes when you die, and it
goes to the other person. It never enters the estate because the decedent’s interest is gone
the moment he dies.
c. Inter Vivos Trusts—Where you put your property in a trust but retain the right to revoke,
a gift has not been made. Because you have the right to revoke, you have a reverter
interest and the thought is that once you die, your right to revoke is extinguished and
therefore the property is erased from your probate estate for probate purposes.
d. Retirement Account—If you designate another person (not your estate) as a beneficiary,
it won’t end up in the probate estate.
e. Inter Vivos Gifts—Anything you give away during your life is not part of the probate
estate because you no longer own it when you die.
Payment of Claims—Order of Priority Expenses (§3805) MEMORIZE
1. If estate is insufficient to pay all claims and allowances in full, the personal representative shall
make payment in the following order of priority
a. Costs and expenses of administration
b. Reasonable funeral and burial expenses
c. Homestead allowance
d. Family allowance
e. Exempt property
f. Debts and taxes with priority under federal law, including but not limited to, medical
assistance payment that are subject to adjustment or recovery from an estate under the
social security act (e.g., unpaid federal income taxes)
g. Reasonable and necessary medical and hospital expenses of the decedent’s last illness,
including a compensation of persons attending the decedent.
h. Debts and taxes with priority under the other laws of this state.
i. All other claims (credit card bill, heating bill, etc.).
2. To figure the distributable estate, you take the total assets and subtract all of these expenses. The
amount that is left over is the distributable to be disbursed in accordance with the will or the rules
of intestacy.
_____________________________________________________________________________________

INTESTACY
When Does Intestacy Come Into Play? (§2101)
1. Any part of a decedent’s estate not effectively disposed of by will passes by intestate succession
to the decedent’s heirs as prescribed in this act, except as modified by the decedent’s will.
Situations Where Intestacy is Applied
1. No will
2. Will that doesn’t pass all the property
3. Some part of the will is deemed ineffective
4. Negative bequest

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Who Gets to Take Under Intestacy?

1. Survival Requirement For A Person to Inherit Under Intestacy (§§2104/2108)
a. An individual who fails to survive the decedent by 120 hours is considered to have
predeceased the decedent.
b. A potential heir is treated as living if the baby survives for 120 hours after birth.
c. Using clear and convincing evidence, it must be shown that the heir survived the
decedent by 120 hours.
2. Surviving Spouses (§2801)
a. The statute punishes ex-spouses and “bad” spouses.
b. If you got divorced or had the marriage annulled, you are no longer a spouse (separation
is ok).
c. Even if you are legally married, we will not recognize you as a spouse if:
i. At the time of the decedent’s death the spouse is living in a bigamous
relationship with another individual. (“scallywag provision”)
ii. An individual did any of the following for 1 year or more before the death of the
deceased person:
1. Was willfully absent from the decedent spouse.
2. Deserted the decedent spouse.
3. Willfully neglected or refused to provide support for the decedent spouse
if required to do so by law.
3. Parents (§1106i)—Does not include foster parent, step-parent, or grandparent
a. NOTE: Ancestors are parents, grandparents and everyone up the family tree.
4. Children (§1103f)—Does not include a foster child, stepchild, or a more remote descendant, but
does include adopted children.
a. NOTE: Descendants include children, grandchildren, great-grandchildren, and further
down the line.
5. Half-Blood (§2107)—A person is of half blood where they have one natural parent in common.
a. A relative of the half blood inherits the same share he or she would inherit if he were of
the whole blood.
6. Parent/Child Relationship (§2114)
a. General Principle – child of his or her biological parents, regardless of marital status.
i. Exception 1—Reproductive technology used by woman and the husband
consented. Even though the father isn’t technically the biological father, we
consider the husband and wife to be the parents.
ii. Exception 2—Bastards – A child born out of wedlock, or by a different dad even
though the mom is married to a different guy. A man will be considered the
natural father if he does 1 of 4 things:
1. The man joins with the child’s mother and acknowledges that child as his
by completing an acknowledgment of parentage. (birth certificate?)
2. The man joins the mother in a written request for a correction of
certificate of birth pertaining to the child that results in issuance of a
substituted certificate recording the child’s birth.
3. The man and child have established a mutually acknowledged
relationship of parent and child that begins before the child becomes age
18 and continues until terminated by the death of either.
4. The man is determined to be the child’s father and an order of filiation
establishing that paternity is entered as provided bin the paternity act.
iii. Exception 3—Adopted children are considered the children of their adoptive
parents and the rights of natural parents are extinguished.

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Who Gets the Intestate Estate

1. What Does the Surviving Spouse Get Under Intestacy? (§2102)
a. The entire intestate estate if no descendant or parent of the decedent survives the
decedent.
b. The first $150,000, plus ½ of any balance of the intestate estate
i. All surviving descendants of the decedent are also descendants of the surviving
spouse and the surviving spouse has no other descendants.
ii. All surviving descendants of the decedent are also descendants of the SS and the
SS has 1 or more surviving descendants who are not descendants of the decedent.
iii. 1 or more, but not all, of the decedent’s surviving descendants are not
descendants of the SS.
c. The first $150,000, plus ¾ of any balance of the intestate estate
i. If no descendant of the decedent survives the decedent, but a parent of the
decedent survives the decedent.
d. The first $100,000, plus ½ of any balance of the intestate estate
i. If none of the decedent’s surviving descendants are descendants of the surviving
spouse (i.e. no children in common).
2. Any part of the intestate estate that does not pass to the decedent’s surviving spouse under
2102, or the entire intestate estate if there is no surviving spouse, passes in the following
order to the following individuals who survive the decedent (See EPIC §2103)
a. The decedent’s descendant’s by representation.
b. If there is no surviving descendant, the decedent’s parents equally if both survive or to
the surviving parent.
c. If there is no surviving descendant or parent, the descendants of the decedent’s parents or
of either of them by representation (i.e. brothers and sisters).
d. If there is no surviving descendant, parent, or descendant of a parent, but the decedent is
survived by 1 or more grandparents or descendants of grandparents, ½ f the estate passes
to the decedent’s paternal grandparents equally if both survive, or to the surviving
paternal grandparent, or to the descendants of the decedent’s paternal grandparents either
of them if both are deceased, the descendants taking by representation; and the other ½
passes to the decedent’s maternal relatives in the same manner. If there is no surviving
grandparent or descendant of a grandparent on either the paternal or the maternal side, the
entire estate passes to the decedent’s relatives on the other side in the same manner as the
½.
e. If there is no taker, then the property escheats to the state.
3. “Representation”
a. In a system where certain property is divided up, it is the right of a person to take a share
of an estate that a predeceased ancestor would have taken (to represent the ancestor).
b. The two types of representation we study:
i. Establishes a priority generation of descendants
ii. Tells us how we are going to divide the assets
iii. Tells us what happens to the share of a predeceased member of the priority
generation.
4. Types of Representation Systems
a. Per Stirpes (2718)—a scheme of representation whereby descendants of a deceased taker
of a share of an estate receive their ancestor’s share.
i. One share for each child and one share for each child’s descendants.
ii. Never recombine the money.
b. Per Capita with Per Capita Representation (old UPC)—a scheme of distribution of an
estate whereby all individuals of the relevant status take equal shares (i.e. count all
surviving issue and divide equally among all of them).

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c. Per Capita with Each Generation (Michigan Default Rule)—a scheme of representation
whereby all takers of an estate in a generation are treated equally, regardless from whom
they are descended or how many siblings they have.
i. All takers in a level are treated equally.
ii. Recombine after the first level.

REPRESENTATION SYSTEMS FOR DESCENDANTS OF THE DECEDENT

PER CAPITA WITH PER CAPITA AT

PER STIRPES PER CAPITA EACH GENERATION
REPRESENTATION (MICHIGAN)
(OLD UPC)
ROOT Always the first First generation with at First generation with at
GENERATION generation least one actual survivor least one actual survivor

NUMBER OF Total of (1) actual Total of (1) actual Total of (1) actual
PRIMARY survivors in the root survivors in the root survivors in the root
SHARES IN ROOT generation plus (2) generation plus (2) generation plus (2)
GENERATION predeceased persons predeceased persons predeceased persons
who left surviving who left surviving who left surviving
descendants descendants descendants
RECOMBINE
“UNUSED” No No Yes
PRIMARY
SHARES?

5. What do you do when you descend from both bloodlines? (2113)

a. An individual who is related to the decedent through 2 lines of relationship is entitled to
only a single share based on the relationship that would entitle the individual to the larger
share.
6. EPIC §2105 (when property escheats to the state)
a. If there is no taker under the provisions of this article, the intestate estate passes to the
state.

Intestacy Summary—NOTE: Heirs are those who are entitled to another’s real property by intestate
succession.
1. Surviving spouse takes first
2. Descendants (kids, grandkids, etc) take second
3. If none of them, then parents and their descendants (brother/sister).
4. If no parents and their descendants, then grandparents and their descendants.
5. If none of them, then it goes to the State.
a. In-laws get nothing under intestacy.

Limits on the Intestate Share

1. Disclai m er (Renunciation)—a refusal to accept the benefits under a will or intestate
succession statute.
a. Common Law—an heir cannot disclaim his intestate share (see Coo mes) (majority
rule at common law).
i. However, disclaimer of devises is allowed.

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b. EPIC (§2902(1))—a person, or fiduciary representing a person to whom a

disclaimable interest devolves, may disclaim a disclaimable interest in whole or in
part…
i. You can disclaim after the death now.
ii. Requirements (Elements) of Disclaimer Form (2903)
1. In writing.
2. Declaring disclaimer.
3. Describing the disclaimed interest.
4. Signed by the disclaimant.
5. Delivered within the proscribed time period
a. After death of the owner and before an event in EPIC 2910.
6. To the proper person (personal representative of the estate after
death)
a. To PR cases of intestacy, EPIC 2904.
c. Effect of Disclaimer—If you have disclaimed, we will treat that person as if they
predeceased the decedent (§2907).
i. However, if the descendants of the disclaimant would take the disclaimant’s
share by representation if the disclaimant predeceased the decedent, then
ONLY the disclaimed interest passes by representation to the descendants of
the disclaimant who survive the decedent. (Basically, we don’t want someone
to disclaim just to increase the share that her kids will get).
2. Malfeasance (Slay er Statute) (if you intentionally kill the decedent) (§2803)
a. Common Law Rules
i. Killer gets it (Minority)
ii. Equitable Decision—Killer doesn’t get it (Minority)
iii. Judicial “Fig-Leaf”—Killer inherits with legal title, but under equity cannot
enjoy it  Killer is now a trustee.
b. Michigan’s Slayer Statute—An individual who feloniously and intentionally kills the
decedent forfeits all benefits under this article with respect to the decedent’s estate,
including an intestate share, an elective share, an omitted spouse’s or child’s share, a
homestead allowance, a family allowance, and exempt property.
i. If the victim dies intestate, treat the killer as if he disclaimed his interest.
ii. If the victim dies with a will, the killer loses everything in the will (that part
of the will is revoked).
iii. If the victim and the killer own something as joint tenants with rights of
survivorship, they become tenants in co mmon. So the slayer does get to keep
his share of the property, but he does not get the victim’s share.
3. Advancem ents – 2109
a. Something a person gives away in life and the concept is that the person intends that
gift to be something toward what you would get in intestacy (an inter vivos gift to a
would be heir).
b. Only applies when someone dies intestate.
c. A gift given during life counts as an advancement if one of two requirements are met:
i. The decedent must declare, in writing (formal or informal), at the time the
gift was made (contemporaneous writing), that it was an advancement; or
ii. The heir must have acknowledged in writing that the gift was an
advancement, and the writing does not have to be contemporaneous.
iii. If the person receiving the advancement dies before the decedent:
1. The property is not taken into account in computing the division and
distribution of the decedent’s intestate estate, UNLESS the decedent’s
contemporaneous writing provides otherwise (the gift is forgiven –
not considered an advance).

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4. Assignme nts of Expectancy

a. Expectancy is NOT entitlement
b. Rule: Assignment of an expectancy is not valid at law.
c. Rule: Equity will only enforce the contract if it is fair and there was adequate
consideration.
i. If there is no consideration and is just expectancy, the courts will not enforce
it because expectancy is not enough of a property right.
Family Protections
 There are Three Allowances—Homestead Allowance, Fa mily Allowance, Exempt Property
 These protections are available whether decedent dies testate or intestate.
 Family protections are paid before the estate is divided.
 Policy—To protect the immediate family, even if we have a testator who has a lot of bills.
1. The Homestead Allowance – 2402
a. Purpose – To provide the family with somewhere to live. It is to be used for rent,
the mortgage, etc. We want to keep a roof over the family’s head.
b. Amount - $15,000
c. Recipient – The surviving spouse. If no surviving spouse, it will be split among minor
and dependent children.
2. Reasonable Family Allowance – 2403
a. Purpose – To provide support/maintenance for the family. This is money for food,
clothes, to pay the heat bill, etc.
b. Length – For during the probate period, but not to exceed one year.
c. You get a lump sum. $18,000 is the “safe harbor.” Up to $18,000 will definitely be
reasonable. But you can try to get more.
3. Exempt Property – 2404
a. Purpose – To allow the family to take some “things” from the estate. Ex: Furniture,
car, appliances, sentimental personal property.
b. Amount – Not to exceed $10,000
c. Recipient – Belongs to the surviving spouse. If there is not, then the decedent’s
children are entitled to it (this includes adult kids).
d. Ex: Family wants the car. It cost $17,000, but $12,000 is still owed on it. So if the
family chooses the car it only counts as $5,000 of the $10,000 allowance.
Spousal Protections
 This section deals with OTHER spousal protections and protections for children, in addition
to the three above.
 Two Protections for Surviving Spouses
o Election
 Pre-Marital Will
 ***The surviving spouse can choose whichever one will give him the higher amount.
 ***If the will leaves everything to the children of a previous relationship, election is always
the better option.
1. The Elective Share of the Surviving Spouse – EPIC 2202:
a. Where Decedent was INTESTATE – EPIC 2202(1):
i. A surviving spouse may elect
1. Intestate Share under EPIC 2102; OR
2. Dower Rights (558.1)
a. Dower means use during her natural life
b. Dower rights are for female surviving spouses only; the widow
has the choice of:
i. 1/3 of any real property that would go in probate; OR
ii. 1/3 of the rents or profits from the property.
iii. Widow may want to stay on the property or she
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iv. NOTE: When the widow dies, the property goes back
into the husband’s estate.
b. Where Decedent was TESTATE – EPIC 2202(2):
i. A surviving spouse may elect
1. Take what they would get in the will (abide by the terms of the will);
OR
2. Dower rights (if the surviving spouse is a female); OR
3. Forced share—A forced share is a share of the estate, set aside by law,
for the surviving spouse, regardless of what the will provides. It
“forces” the estate to give something to the surviving spouse.
a. Formula for Forced Share:
i. Forced Share = ½ (Intestate Share from EPIC 2102) –
½ (Value of Non-Probate Property Received from the
Decedent).
b. NOTE on Forced Shares:
i. The forced share is NOT available in community
property states. In community property states, each
spouse has an immediate half interest in the property
that cannot be alienated by the other spouse.
Therefore, the concept of a forced share doesn’t
make sense.
ii. Policy Concept—Marriage is a partnership and
anything that accrues during the partnership belongs
to both of them (marital property, half and half. Th e
separate property goes to the person who owned it
before the marriage.
iii. Common Law—Under the common law, any property
acquired by marriage belongs to who earned it and
received it. The spouse won’t have rights to it unless
it is titled in their name.
1. If the marriage was short, community
property won’t get you much, but with
common law, you get to elect all the property
and not just what was acquired during the
marriage.
2. After-Marri ed Spous e (Omitted Spouse) – 2301
a. What is an after-married spouse?
i. An after-married spouse is a spouse that married the testator after a valid will
had already been executed.
ii. The presumption is that the after-married spouse was not left out of the will
intentionally, so protections are provided.
b. How do you calculate the after-married spouse’s share?
i. First, take out everything that was left to the decedent’s descendants who
were born before the testator married the surviving spouse and who is not the
surviving spouse’s child.
ii. The surviving spouse then gets what she would have received had the decedent
died intestate.
c. Exception: The above calculation does not take place and the will is honored as
written if:
i. From the will or other evidence, it appears that the will was made in
contemplation of the testator’s marriage to the surviving spouse;
ii. The will expresses the intention that it is to be effective notwithstanding a
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iii. The testator provided for the spouse by transfer outside the will, and the
intent that the transfer be a substitute for a testamentary provision is shown
by the testator’s statements or is reasonably inferred from the amount of the
transfer or other evidence.
2. Waiver – 2205
a. A spouse may waive a share under intestate succession, homestead allowance,
election, dower, exempt property, or family allowance. (Ex. Pre-nup, Post-nup)
b. It must:
i. Be a written contract, agreement, or waiver
ii. Signed by the party waiving his rights
iii. After full disclosure
c. A waiver of “all rights” includes:
i. All rights to homestead allowance, election, dower, exempt property, and
family allowance and is a renunciation of all benefits that would pass by
intestate succession or by virtue of a will executed before the waiver.
d. The waiver may be made before or after the marriage.
e. Only spouses may waive their rights; children cannot.
Protection for After-born/After-adopted Children – 2302
1. Purpose: Allows for a child, who is born after the will is drawn up, but before the testator
dies to be accounted for.
2. Eligible Chi ldren:
a. Children born after the will was executed
b. Children adopted after the will was executed
c. Children that weren’t left anything because the parent thought they were dead at the
time they created their will
3. Chi ldren that are screwed and who are going to be ticked:
a. Children that were alive when the parent executed their will who were not mentioned
or who were intentionally omitted.
4. Key Qu estion: How many children were around when the will was executed:
a. If No Children When Will Was Executed:
i. If no child was living when the will was executed, the child takes the intestate
share the child would have received had the testator died intestate.
ii. UNLESS:
1. The will provides all or a substantial portion of the estate to the other
parent AND parent survives the testator AND is entitled to take
under the will, i.e. not an ex-spouse or a slayer.
2. The presumption is that the parent will provide for the child.
b. If 1 or More Children When Executed:
i. If testator had one or more living children at the time the will was executed,
and the will devised property or an interest in property to one or more of the
then-living children, an omitted after-born or after-adopted child is entitled
to a share of what the provided-for children received, AS LONG AS:
1. The omitted child’s share is limited to devises made to the testator’s
then- living children in the will;
2. An equal share of the estate is given to each child;
3. The interest granted is feasibly of the same character, whether
equitable or legal, present or future, as that devised to the testator’s
then-living children under the will.
5. Exceptions: This rule does not apply where any of the following exist:
a. The omission of the after-born/after-adopted child was intentional.
b. The after-born/after-adopted child was provided for outside the will, in a way where it
appears that it was a substitute for being in the will.

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c. If the will leaves everything to the spouse, and nothing to the children, the after-born
child will get nothing, because it is presumed that the surviving parent will take care
of the child.
d. If the testator left nothing to the already-born children, it is assumed that testator did
not want to leave anything to the after-born children either.

Professional Liability Issues

1. Gen eral Rul e: If an attorney is negligent in preparing estate planning documents, his
negligence may extend to the named beneficiaries of the will.
2. Standing: In order to sue, you have to be named in the will or other testamentary
documents; you CANNOT use extrinsic evidence to prove the mistake of a lawyer.
3. RULE: When determining if the attorney has committed malpractice, you can only look at
the FOUR CORNERS of the will (and other documents/estate planning package). If you are
named as a beneficiary in the will and the attorney has done something wrong (like
improperly executed the will), you have standing to sue.
4. RULE: Third party beneficiaries in the estate planning documents are able to have standing
to sue the attorney even though they are not in direct privity with the attorney.
a. The third party must establish that the decedent’s intent was frustrated in
the document (all documents that are part of the estate planning); you cannot use
extrinsic evidence.

Extrinsic Evidence
1. The Courts are very reluctant to look outside the will to determine intent.
2. Permissible Uses of Extrinsic Evidence
a. Demonstrate or rebut proper execution
b. Demonstrate lack of testamentary capacity
c. Demonstrate lack of testamentary intent
d. Demonstrate the existence of undue influence, fraud, mistake, duress or revocation
e. Demonstrate the existence of an ambiguity
f. Clear up an ambiguity (may include evidence of testator’s own statements as to his
intent)
g. Demonstrate testator’s intent as to the effect of a writing (will? revocation?
revival?)
h. Rebut a presumed intent (may include evidence of testator’s own statements as to his
intent)
i. Rebut a presumption other than intent.
3. 1-4 Are Will Challenges that can’t be answered by just looking at the will.
4. 5-6 Deal with Ambiguity
a. Latent – When you can’t tell that it is an ambiguity just by looking at the will.
b. Patent – When you can tell on the will’s face that there is an ambiguity in the
document.
5. 8-9 Deal with Presumptions

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WILLS
Introduction
1. Definition—An instrument or declaration by which one directs the disposition of one’s
property after death.
a. A will is, by definition, ambulatory, or subject to change until the death of the
testator.
2. Testamentary Intent
a. In order for a person to make a will, the person (testator) must have two things:
i. Intent for the document to be their will
ii. A plan of distribution
Types of Wi lls Allowed in Michigan
1. Formal Wi ll—Each state has different requirements for a formal will, but the requirements
for a valid formal will in Michigan are listed below.
2. Codicil—A supplement to a will that adds or deletes provisions or otherwise changes the
will.
3. Holographic Wil l
a. A will wholly or in substantial part handwritten by the testator.
b. This is not a formal will.
c. Requirements for a Holographic Will:
i. Testamentary Capacity
ii. Doesn’t have to be witnessed
iii. Material portions must be in the testator’s own handwriting
iv. Must be signed by the testator
1. Can’t be signed by another in the testator’s conscious presence.
v. Must be dated
4. Self-Proving Wi ll—A will whose due execution is recited in an affidavit contained in or
appended to the will itself and signed before a notary public by the testator and the attesting
witnesses.
5. Pour-Over Wi ll—A will that allows a residuary clause to transfer everything to another
document.
6. Joint Will—The wills of more than one person (usually husband and wife) executed in a
single physical document signed by both. Mutual wills, on the other hand, are separate wills
that contain reciprocal or identical provisions for disposition of each testator’s property.
7. Living Wil l—Not a will at all, but an instrument directing that the signer’s life shall not be
prolonged by extraordinary medical procedures when there is no expectation of recovery.
8. Conditional Wil l—A will that is intended to be operative only on the occurrence of a
specified condition or event, failing which it is of no effect (standard is “clear and
unambiguous”).

Statutory Requirements for Wills in Michigan

1. Testamentary Capacity
a. This is a general term for the mental state and other factors prerequisite to a person’s
ability to execute a valid will.
i. Two Factors for Testamentary Capacity:
1. Must be at least 18 years of age.
2. Must be of sound mind (Sufficient Mental Capacity)
a. The testator must know the following things:
i. The business they are engaged in;
1. That you are making a will.
ii. The natural objects of their bounty;
1. Who their relatives are.
iii. What their property is;
1. Need to know what you own.

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iv. The planned distribution

1. Need to know who gets what.
ii. Mental Incapacity
1. Just because the decedent is mentally deteriorated doesn’t mean that
she doesn’t have testamentary capacity to make the will, see Gilmer.
iii. Insane Delusions
1. If the insane delusion stands in the way of one of the four factors of
sound mind with nothing rational to back it up, the testator will be
deemed to be not of sound mind, see Hargrove.
2. In Writi ng
a. The will doesn’t necessarily have to be on paper. It just has to be written or typed on
some surface.
3. Signed by the Testator (signature or mark intending to be signature)
a. Or signed by another person in the testator’s conscious presence.
i. Videoconference may be allowed.
4. There Must be Two Witnesses
a. The witnesses must sign or attest the will within a reasonable time after:
i. Watching the testator sign;
ii. Testator’s acknowledgement of his own signature;
iii. Testator’s acknowledgement of his will.
b. NOTES:
i. Competency of Witness (EPIC 2505(1))—witnesses are competent if they
are also competent to be a witness at trial.
ii. There are certain situations where the witness may be a notary or something
so you need to know how that affects the validity of the will (look in the
other 10 outlines you have), see Gerhart.
iii. Witness Also Devisee (EPIC 2505(2))—In Michigan an interested person can
be a witness (minority rule)

Harmless Error– EPIC 2503

1. Definition—A rule that allows a document that is missing one of the requirements to let the
court have dispensing power to get rid of one of the requirements and still find the document
to be valid.
a. You need clear and convincing evidence that the decedent intended the document to
constitute:
i. The decedent’s will
ii. A partial or complete revocation of the decedent’s will.
iii. An addition or alteration of the decedent’s will.
iv. A revival of a formerly revoked will.
b. NOTE: The court will not forgive a document that is missing a signature.

Ways to Challenge a Will

1. Formation
a. This just means that you are saying that the will hasn’t met all of the requirements to
be a valid will.
2. Testamentary Capacity—This just means that you are saying that the testator didn’t meet
the two requirements for sufficient testamentary capacity.
3. Mental Defici ency—Lack of sufficient memory or understanding to execute a valid will.
a. This is hard for a challenger to prove because a person can be declared mentally
incapacitated, and be appointed a guardian, but a court can still find that they have
the requisite capacity to execute a will.
i. Insane Delusion
1. A mental incapacity that prevents an otherwise competent testator
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2. For a court to declare a will invalid for this reason, they have to find
that the testator’s beliefs are so unfounded and bizarre as to be
explainable only as the product of a mental illness.
a. Ex. A person thinks their daughter has been possessed by
aliens, so they disinherit her.
4. Fraud—Intentional deception of the testator by another in such a manner as to affect the
terms of the testator’s will.
a. Fraud in the Inducement: A misrepresentation to the testator as to facts that serve as
an inducement for the execution of the will or the inclusion of certain provisions.
b. Fraud in the Execution: This concerns deception as to the nature or contents of the
document the testator signs.
i. Elements of Fraud
1. A statement that is false;
2. The statement is known to be false;
3. The statement is material;
4. Made with the intent to deceive;
5. Actually does deceive the testator;
6. Causes the testator to act in reliance
ii. NOTE: Courts will go to great lengths to prevent fraud.
iii. NOTE: The person challenging the will has the burden of proof the entire
time.
5. Mistake—An inadvertent, usually self-induced misconception of fact or law that has an
effect on the testator’s will.
a. Mistake in the Inducement: This occurs when the testator is mistaken about some
matter of fact or law and is thereby induced to execute a will in a certain way.
b. Mistake in the Execution: This exists if the testator is mistaken as to the nature of
content of the document executed.
c. NOTE: The court is unlikely to fix a mistake.
6. Undue Influe nce—An act that has the effect of overcoming the testator’s free will in the
execution of a testamentary instrument.
a. Three Factor Test
i. The existence of a confidential or fiduciary relationship between the grantor
and a fiduciary;
ii. The fiduciary benefits from the transaction;
iii. The fiduciary had an opportunity to influence the grantor’s decision in the
transaction.
1. If you can prove these three factors, you can create a presumption of
undue influence and shift the burden of proof to the proponent of the
will.
b. Seven Factors to see if Undue Influence was Exerted
i. Procurement – participation by the beneficiary in the preparation of the will.
ii. Lack of independent advice
iii. Secrecy or haste
iv. Change in attitude toward others
v. Change in the decedent’s plan of disposition of property
vi. An unnatural or unjust gift
vii. Susceptibility to influence
7. Burden of Proof– EPIC 3407
a. The proponent must show…
i. The person died
ii. The right venue
iii. Prima facie proof of due execution
1. You just have to show that the will has met the statutory
requirements.

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b. The contestant must show…

i. This differs depending on what ground you are challenging the will on.

Ways to Revoke a Will

1. Revocation by Physical Act—Revocation of a will by something done to or upon the
document.
a. The revocation must be done with the intent of revoking. It can also be done by
another person who is in the testator’s conscious presence (ACT + INTENT).
b. Revocation by Physical Act can be done by:
i. Burning
ii. Tearing
iii. Cancelling
iv. Obliterating
v. Destroying all or part of the will
c. NOTE: All of these constitute a revocatory act even if the words of the will aren’t
touched.
2. Revocation by Subs equent Will– EPIC 2507—Revocation of a will by another writing,
expressly or by implication.
a. All of the statutory requirements must be met in the subsequent will for it to be valid.
i. A subsequent will can also revoke by inconsistency.
1. Example
a. Will 1: To A, my farm.
b. Will 2: To B and C, all my effects.
3. Lost Will—A statute setting out the conditions under which a will that cannot be found after
the testator’s death can nevertheless be probated.
a. A lost will is presumed to be revoked if:
i. The will was validly executed and in the possession of the testator;
ii. The testator had control of the will;
iii. There was no access to the will by people with a benefit; and
iv. After a diligent search, it could not be found.
b. This presumption can be rebutted if:
i. Interested parties had access to the will;
ii. The testator indicated happiness with the will; or
iii. A house fire destroyed the will.
4. Revocation by Operation of Law—Revocation of a will by virtue of some statutorily
defined triggering event or circumstance.
a. Divorce
b. Slayer Statute
5. Doctrine of Dependent Relative Revocation—A common law doctrine of conditional
revocation that permits a court to disregard a purported revocation of a will.
a. A devisee would use this to bring back a revoked will provision.
i. Five Issues to Address
1. Is there an effective will?
2. Was the will or a provision in the will effectively revoked?
3. Is there an attempt to make a new will or new provision?
4. If the attempted new will or provision is not effective, is there a
chance that the “Harmless Error” section of EPIC will save the
attempted replacement or will provision?
5. Will the court invoke the equitable Doctrine of Dependent Relative
Revocation to save the revoked will or provision?

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Matters of Inclusion (Including other things in a Will)

1. Contracts to Make a Will – 2514 (Week 7 Objectives – I have no clue)
a. 2514 – A contract to make a will or devise, not to revoke a will or devise, or to die
intestate may be established only by one or more of the following:
i. Provisions of a will stating material provisions of the contract
ii. An express reference in a will to a contract and extrinsic evidence proving the
terms of the contract
iii. A writing signed by the decedent evidencing the contract
iv. ****If you have one of these things, you can bring it as evidence to prove that
there was a contract, but it is not the contract that you are probating.
v. ****If you can’t prove that there was a contract, look for an implied contract,
and receive quantum meruit for the services performed.
1. Argue some theory of unjust enrichment and try to get compensation for
the services performed.
b. Wills can always be revoked until death.
c. Contracts in wills can be unilaterally revoked at any time as long as both parties are still
alive.
i. But, once one of the two parties die, the surviving person must abide by the will.
Otherwise, he has breached the contract.
ii. The breach occurs when the 2nd person dies (because he could always change his
will back before he dies).
d. Usually, the remedy for a breach will be specific performance or tracing of the assets.
i. Who faces the liability????
e. A will contract is an agreement with consideration, by a testator to execute (or not to
revoke) a will containing particular provisions.
f. Proving Consideration
i. One way to prove is to die having performed
ii. Another way is if you have irrevocably departed with something.
g. Common Situations for Contract to Make a Will
i. Someone performs personal services with expectation of a bequest in a will
ii. Mutual Wills
2. Mutual/Joint Wills
a. Joint Will – Rather than having two documents, there is one document with two people,
which is executed by both of them.
b. Mutual Will – Two documents with mirror or same provisions; reflections of each
other’s wills.
c. The execution of a joint will or mutual wills does not create a presumption of a contract
not to revoke the will or wills. (2514)
d. There isn’t consideration until one of the parties dies. ***Ask: Is this right?
3. Integration
a. The inclusion in one whole document, or series of documents, of all the writings that
constitute a will.
i. Ways to integrate
1. Staple the pages together;
2. Put page numbers;
a. Ex. Page 1 of 7
3. Have the client initial and date each page;
4. Have paragraphs that flow onto the next page.
4. Incorporation by Reference
a. A process for giving testamentary effect to documents that are not physically a part of the
executed will.

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i. Elements
1. The writing has to be in existence when the will is executed;
2. The will provision must describe the thing being incorporated in clear
and definite terms; and
3. The language in the will must show the testator’s intent to incorporate.
5. Written List of Tangible Personal Property
a. The incorporation of a document that distributes an item of personal property.
i. Elements:
1. The list is handwritten OR typed with a signature at the end;
2. The list has to describe items and devisees with reasonable certainty;
and
3. There has to be some reference in the will to the list, but not the same
type of description needed by incorporation by reference.
6. Facts of Independent Significance
a. A doctrine that gives testamentary effect to facts or circumstances that are not a part of
the executed will.
i. A will can dispose of property by reference to acts and events that have
significance apart from its effect on dispositions made by the will.
1. Ex. Bill leaves his estate to Bernice, and in so doing he refers to a list of
poetry books that he wants Bernice to have. It is a list of books he has
acquired, regularly kept for his tax or insurance records and too lengthy
and detailed to insert verbatim into the will. While the list already exists,
Bill intends to add or change it as he acquires or disposes of poetry
books. Because the list has an independent, non-testamentary purpose, it
may validly be included in Bill’s overall testamentary plan despite being
changed (or even created anew) after execution of the will.

Doctrines of Change
1. Ademption by Extinction
a. The nullification of a bequest of property because it no longer is in the testator’s
estate at the time of death.
i. Only applies to specific devises.
1. Ex. You devise a necklace to your daughter, but then you sell it
before you die.
a. EPIC 2606: A devisee can get the value to the extent that
it’s gone. We presume that ademption was not intended.
b. NOTE: There are three examples of what the devisee is entitled to in the Murray
outline.
2. Ademption by Satisfaction
a. The abrogation of a bequest by an inter vivos gift made by the testator to the legatee.
i. Usually only applies to general devises.
ii. Property the testator gave in his lifetime to a person is treated as a
satisfaction of a devise only if:
1. The will provides for a deduction of the gift;
2. The testator declared in a contemporaneous writing that the gift is in
the satisfaction of the devise or that its value is to be deducted from
the value of the devise; or
3. The devisee acknowledges in writing that the gift is in satisfaction of
the devise or that its value is to be deducted from the value of the
devise.

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3. Exoneration / Non-Exoneration
a. The payment of encumbrances on certain property in the estate out of other estate
assets.
i. Exoneration treats a mortgage or other such liens merely as debts of the
testator, to be paid like other debts; thus it applies only if the lien was a
personal obligation of the testator.
1. EPIC 2607: If a specific devise or a transfer has a mortgage or other
security interest on it, the obligation passes on to the devisee, without
the right of exoneration, regardless of a general directive in the will to
pay debts.
4. Accretion / Accession
a. Additions to or increases in the value of the bequeathed property that accrue before
the death of the testator or before distribution to the beneficiary.
i. This only applies to specific devises.
1. Usually the devisee will acquire the additional stocks or securities if
they accrued as a result of company action such as a stock split.
5. Lapse / Anti-Lapse
a. The termination of a testamentary gift because the beneficiary pre-deceased the
testator or is unable or unwilling to accept the gift.
i. This arises in a situation where a devisee dies before the testator or did not
survive the testator by 120 hours.
ii. Today there is a presumption that the testator would want the devise to go
to the devisee’s descendants in the event that the devise predeceased the
testator.
1. Analysis:
a. Did the devisee predecease the testator?
b. Did the testator provide in his will for an alternate devisee?
c. Is the devisee either the grandparent of the testator, a
descendant of the testator’s grandparents, or the testator’s
step-child?
d. Did the predeceased devisee leave a surviving descendant?

_____________________________________________________________________________________

TRUSTS
1. Basics
a. Transfer of property with duties attached and the settler identifies beneficiaries and
those people receive the benefits of the trust
b. Important people
i. Settlor – Creates the trust
ii. Trustee – Runs the trust
iii. Res/Principal – The stuff in the trust
1. Res has 2 values
a. Face value
b. Income value
iv. Beneficiaries – People who benefit from the trust
c. Elements of a Valid Trust
i. Competent Settlor and Trustee
1. Same as for a will starting in 2010
ii. Clear and Unequivocal Intent to Create a Trust
1. The settler must intend to:
a. Create a trust
b. Impose duties on the trustee
iii. Ascertainable Res

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1. Was there an effective transfer of a trust?

2. Was there a property right transferred (can’t be just an expectancy)
iv. Identifiable Beneficiary
1. Ascertainable standard to determine who the beneficiaries are
v. Duties for the Trustee
vi. Note: Trust can be declared orally or in writing unless the SOF says otherwise
(i.e. real property).
d. Two Types of Trusts
i. Inter vivos trust (created during life)
ii. Testamentary trust (created at death)
2. Trust Creation
e. Prohibited Trust Conditions
i. We don’t honor it if…
1. It violates the law; or
2. It violates public policy
ii. Marriage
1. If the condition requires someone to never marry we consider it a
total restraint and it will not be enforced.
a. Exception: When dealing with a remarriage, a total restraint
will be allowed.
b. Also: If there is evidence of another reason for the restraint
then that will make it ok.
2. If it is a partial restraint, it will be ok as long as it is reasonable.
a. TEST: How likely is it that she will follow the rules?
b. Shapira: If not married at the time of the testator’s death,
the son had seven years to marry a Jewish girl or his share
would go to the State of Israel. The Court said this was ok
because it was a restriction on upon the inheritance, not a
restriction upon the son’s Constitutional right to marry.
iii. Personal Habits
1. If it is a bad habit it won’t be enforced
a. Ex: As long as she smokes 5 packs of cigarettes a day
2. If it is a good habit it will be enforced
a. Ex: As long as she doesn’t smoke.
iv. If a provision is invalid, just strike it.
v. Hypos
1. S transfers $500,000 to T, in trust, to pay the income to S’s daughter, D,
for her life, and on D’s death, to distribute the principal to S’s son, R; but
if D ever marries, then the trust should terminate, and T should distribute
the principal to, R. D is not married on the date of the transfer.
a. This is a total restraint and unenforceable
2. S has three children. When S dies, two of his children are adults, one is a
child of eight. S transfers property to T, in trust, to pay the income to the
youngest child until the child dies or marries, whichever occurs first,
then pay the income to S’s children.
a. This is ok. The reason for the restraint is to support the minor
child and then it goes to all of the them.
3. S transfers property to T, in trust, for the benefit of “my daughter, D, but
if D marries X, an individual whom I do not like, then the trust shall
terminate, and the property shall be distributed to my son, R.” D is
engaged to marry X at the time S transfers the property.
a. This is not reasonable because it is not likely that the D will
follow the rules and break off her engagement.

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4. S’s will devises $100,000 to T, in trust, to “pay the income to my son C

for life, provided that, if he ever marries a person who is Catholic at the
time of the marriage, then the trust shall terminate, and the assets shall be
paid to my daughter, D”.
a. More reasonable
5. S transfers $200,000 to T, in trust, to pay the income to his sister for her
life, but if she marries before she is 25 years old, then the income shall
be paid to S’s son, R.
a. Ok as long as it is reasonable. 25 is ok. 75 is probably not.
6. H devises property to T, in trust, for his wife (W), but if W should ever
remarry, then the property shall pass to H’s descendants.
a. This is ok. You can have total restraints when dealing with
remarriages.
7. S leaves $50,000 to T, in trust, to pay income to M, as long as M smokes
no more than 5 cigarettes a day.”
a. Ok.
f. Intent
i. The settler must intend to:
1. Create a trust
2. Impose duties on the trustee
ii. If no intent, then it is a gift outright to the trustee.
iii. Trust Intent – The settler must intend to split equitable and legal title
iv. The trustee has legal title and the beneficiary has equitable title.
v. Hypos
1. Intent: What combinations effectively split title?
S transfers legal title to T and equitable title to B.
Ok
S retains legal title and transfers equitable title to B
The settler can be a trustee, as long as the trustee and
beneficiary are not the same person. So this is ok.
S transfers legal title to T and retains equitable title.
The settler can be a beneficiary - allows for creating
trusts that could take effect if the settler becomes
disabled for some reason. This is ok.
S transfers both legal and equitable title to T.
This is not a trust – this is an outright gift. The same
person has complete interest in the property, so it is not
valid.
S transfers legal title to T and equitable title to both T and B.
A trustee can be a beneficiary as long as he is not the
only beneficiary – there is still a split in the title so this
is ok.
S transfers legal title to both T and B, and equitable title to B.
There is no problem with having multiple trustees. This
is ok, because again we have someone who is watching
out for someone else.
S transfers legal title to both T and B and equitable title to both T
and B
This is ok because there is a split in title – the thought is
that each person will watch the other person.

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g. Beneficiari es
i. The beneficiaries must be identifiable
ii. If a trust fails because of indefiniteness or beneficiary not identifiable then we
get a resulting trust. This is a right of reversion back to the settler. If the
settler has died, then the property goes to his estate.
iii. Spicer – She told her sister to “dispose of as already agreed between us.” If
extrinsic evidence (testimony of doctor and maid) had sufficiently identified
the beneficiary agreed up and the terms of the benefits agreed upon, that
evidence and the precatory language together would have been enough to
establish a testamentary intent. The precatory language standing alone
imposes nothing more than an undefined moral obligation. (Precatory = the
opposite of mandatory – “I hope you will…”) Here we had no duties, no
beneficiary and not intent to create a trust. So the trustee gets fee simple
ownership.
iv. Haskell – “I give my nephew $500 and the rest I leave in trust for him to
dispose of as he pleases.” The attempted trust fails for uncertainty and
indefiniteness.
v. Moss – Caroline’s will said that the residue of her estate should go to the
person who has given her the best care in her declining days. She let her
attorney pick who that person was. This was ok. A trust is not invalidated
by the fact that the trustee is vested with discretion. It is enough that the
testator uses language which is sufficiently clear to enable the court by
extrinsic evidence to identify the beneficiary. And the duty here was to pick
the beneficiary.
h. Trustee
i. It must be a competent trustee
ii. If not, the court will appoint one.
i. Transfer of Ascertainable Trust Res to Trust
i. There must be:
1. An effective transfer
2. An actual interest (not an expectancy)
ii. Declaration of Trust
1. When you declare yourself to be the trustee of your trust.
2. If the owner of property declares himself trustee of the property, a
trust may be created without a transfer of title to the property.
3. He can also revoke it in any way he wants (even orally) and it doesn’t
need to be in the way that is mentioned in the trust. It would be
stupid to make him send himself a letter or call himself.
j. Settlor’s Retentio n of Power – Illusory Trust
i. Trust is void if the settler has retained too much control over the trust.
ii. Too much control = Illusory (and the court doesn’t like illusory trusts)
iii. Test: Did he intend to divest himself of ownership of his property?
iv. Newman – Three days before his death, the decedent created a trust and he
transferred to the trustees everything he owned. But he retained the right to
revoke and amend the trust, he got the income for life, and everything the
trustee did had to be okayed in writing by the settler. The court said he held
too much power. What bothered the court was that the trustee had to put
everything in writing and it had to be okayed by the settler. The settler
basically still had complete control over all the property.
v. Farkas – Had bought bonds in his name, but named someone else as the
beneficiary. The Court said this was no illusory because the beneficiary did
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3. Special Trust Provisions

k. Can Ben eficiary’s Creditors Gain Access to Beneficiary’s Interest In Trust
Assets Prior to Distribution to Beneficiary (Alienability of Equitable
Interests)
i. Always want to ask:
1. What is the beneficiary’s interest? (income, principal or both)
2. Is it ascertainable? (mandatory)
3. If so, when is it due?
a. If payments are at the trustee’s discretion, then there is no
“due date.”
ii. Creditors can only get what the beneficiary can get (if you only get income,
then creditors can’t get at the principal).
iii. Creditors can only get it when it is due.
1. At least one jurisdiction says that if payment is due Jan. 1 and on Jan.
5 the trustee hasn’t paid, the creditor can go after the trustee.
l. Spendthrift Provisions
i. Provisions that specifically say that the assets aren’t subject to creditors.
1. Ex: Assets are not assignable or subject to creditors.
ii. Rule: Spendthrift provisions cannot be reached by creditors and cannot be
assigned because it is the settlor’s property and the settler should be able to do
what they want with their property, unless it is against public policy.
iii. Exceptions to Enforceability
1. Settlor as Beneficiary
a. A settler cannot place property in trust for his own benefit
and keep it beyond the reach of creditors.
2. Child Support or Alimony
a. If the creditor is someone seeking alimony or child support,
the creditor will be able to break through the spendthrift
clause because it is against public policy to make the taxpayers
pay for their welfare when the father could be doing it.
3. Support Provision
m. Support Provision in the Trust
i. A trust that directs the trustee to use income (and/or principal) for the
support of the beneficiary. (i.e. support/education/maintenance)
ii. A support trust does not protect you from creditors that have provided you
with the necessities of life; however, if the casino is coming to collect, the
trustee doesn’t have to pay because they may conclude this is not for support.
iii. If a creditor provided support and the trust is ascertainable then the creditor
can get at it. (support trust + discretionary provision = creditors out of luck)
iv. If the trust is not ascertainable, then the creditor cannot.
n. Discretionary Provision in the Trust
i. The trustee has discretion over whether or not to pay, when to pay, and how
much to pay.
ii. Creditors can’t get at it when it’s not ascertainable (mandatory).

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No Spend/No Discretion Spend/No Discretion Spend/Discretion

General Creditors Yes No No

Alimony Yes Maybe No

Child Support Yes Yes No**

Creditors Providing Necessaries Yes Yes, if support trust No**

**Unless the court determines that denying access would defeat the purpose of the trust

*****If you have a spendthrift and a discretionary then creditors are going to be out of luck except for the
very rare exception of when it would defeat the purpose of the trust.

4. Termi nation
o. ****Note: Private trusts are not allowed to go on and on – they must end.
p. Express Terms
i. There is something in the trust that provides an actual ending.
1. Ex: When the beneficiary reaches the age of 18, the principal will be
paid out.
q. Settlor as Sol e Ben eficiary
i. If you are the sole beneficiary and the settler, even though you didn’t retain
the right to revoke the trust, the trust may still be revoked because there is no
one else to complain.
ii. Woodruff – The trust can only be revoked with the written consent and
approval of the trustee. The settler could revoke without the written consent
and approval of the trustee because she was the settler and sole beneficiary.
r. Mistake, Chal lenges, Etc.
s. By Agree m ent Between the Settlor and All Beneficiaries
i. Underhill – Even though the daughter had no kids at the time, she still could
have kids because she is alive. Therefore, all the beneficiaries cannot agree
and the trust cannot be terminated.
ii. Remember: It reverts back to the settler if there are no beneficiaries.
t. Material Purpos e
i. If the settler is dead and all the beneficiaries agree to terminate the trust, the
Court will not allow it if there is a material purpose for having the trust.
ii. Claflin - Settlor died and the son didn’t want to wait for payments. He
wanted all the money now. Even though all the beneficiaries (just the one
son) agreed, the court said there was a purpose for having the trust, so it
denied his request to terminate the trust. The purpose was not let this kid
have the money. This is sufficient for keeping the money tied up in trust.
u. Execution
i. Ask: Are there duties for the trustee to perform?
1. If no, then it is a dry trust and the court will terminate (execute) the
trust.
ii. Bellows – The Aunt’s will left stuff to the daughter in trust to be held by the
wife. The Court held that the aunt’s trust was passive because the trust
imposed no duties on the trustee and therefore the daughter was entitled to
absolute title. The father’s will left a trust to be used by the wife to support
the daughter. This was not dry because the wife had duties.

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5. Modification of Trusts (Deviation)

a. Admi nistrative
i. Deviation in the decision the trustee can make in his discretion
1. Ex: Where to invest money, use of assets, etc.
ii. Test: Would the settler have agreed to the changes if the settler had foreseen
the current situation?
1. If the purpose of the trust has been fulfilled.
2. If the purpose of the trust has become illegal.
3. If the purpose of the trust is impossible to fulfill.
b. Distribution
i. Property rights created under the trust.
1. Ex: You only have income rights and are trying to get rights to the
principal.
ii. The Court will not do this unless the purpose of the trust would be defeated.
iii. Bosler – The mom left all the kids something in the will, but 3 of the kids had
their money put in a trust and so they only got periodic payments. All the
kids (beneficiaries) agreed to undue this. However, the court refused to allow
it.
c. Powers of Appointment (don’t think I have to know this)
i. General – If you can pick the donee, his estate, or the creditors of the estate
ii. Special – If you can’t pick those three.
iii. Donor of the Power – gives the power
iv. Donee of the Power – Receiver of the power
v. Taker in Default – Who gets it if it fails.
d. Rul e Against Perpetituties
i. Common Law Rule: A private trust must vest within 21 yrs from a life in
being.
ii. If it violates the common law rule you strike the provision.
e. C haritabl e Trusts
i. Defined
1. Serves a public purpose (more than a couple of people)
a. Examples:
i. Relief of poverty (food banks, etc.)
ii. Advancement of Education (University of Dayton)
iii. Advancement of Religion
iv. Promotion of Health (Breast Cancer)
v. Government/Municipal Purpose (Parks)
ii. Can go on indefinitely (unlike private trusts that must comply with the RAP)
iii. Can be an indefinite beneficiary
iv. Can have a modification that is distributive
v. Cy Pres Doctrine
1. Test: If the intent was a general charitable intent, then the trustee
can substitute a different charity (but the new charity has to be
__________).
2. But if the settlor had a very specific intent, then we can’t use the cy
pres doctrine and it reverts back to the settlor.
3. Applies only to charitable trusts
6. Trustee’s Duties
a. Acceptance of Duties
i. Duties of the Trustee, Defined: The duties of the trustee are the functions of
a trustee that the trustee must carry out. Failure to perform a duty is a breach
of trust.

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ii. The duty is mandatory and failure to perform is a breach of duty, which is
actionable.
iii. For someone to be on the hook as a trustee, they have to affirmatively
accept the designation as trustee. If they do not, it goes to the successor
trustee or someone will go to court and have a trustee designated.
1. There are a set of fiduciary duties that attach to the trustee under
common law – EPIC 1212:
a. Duty of Loyalty (no self-dealing/1214)
b. Duty of Care
c. Duty to Segregate the Assets
d. Duty of Impartiality
e. Duty of Provide Accountings
b. Duty to Segregate the Assets
i. Defined: Commingling refers to the mixing together of trust and personal
assets, either inadvertently or intentionally blurring the lines of ownership;
this must be avoided and it is the duty of the trustee to avoid this.
ii. If you com mingle and there is any loss to the beneficiaries, even where you
were careful and prudent, you owe the loss to the beneficiaries.
1. Note that if you have a corporate trustee, they can commingle small
trusts for investments because they are careful enough about the
accounting, so this is an exception to the general rule.
c. The Duty of Loyalty (and Impartiality)
i. Defined: The duty of loyalty and impartiality is the duty to act for, and only
for, the good of the trust and its beneficiaries and not in the trustee’s own
personal interest or that of any third person.
ii. Inherent in the Trustee’s Duties of Loyalty: There is a prohibition against
self-dealing and other forms of conflict of interest.
iii. Summary: You can’t make a transaction with the trust you represent.
1. PROBLEM: One of the assets of a trust is a Dali painting. Trustee is
a collector of fine, contemporary art. He wishes to purchase the
painting from the trust, and will pay 5% over fair market share. If he
purchases the painting, will be breach his fiduciary duty?
2. If he buys it, he violates his duty of loyalty to not self-deal.
iv. Your own personal interest has to be ignored.
d. The Duty of Care—This means that you are going to use the care that a normal,
prudent person would use in caring for the trust’s assets. You are going to use general
standards of acceptable behavior when dealing with the trust.
e. The Duty to Provide Accountings
i. Defined: The trustee has the duty to keep the beneficiaries informed of
pertinent facts relating to the management and condition of the trust. At the
termination of the trust, as well as periodically during its existence, the
trustee has a duty to render an account of trust transactions.
f. Del egation of Duti es
i. Common Law: Trustees may delegate some powers, but have no power to
delegate others.
1. Can Delegate: Ministerial Acts/Duties, like painting building; your
ability to delegate is in part based on your duties and in part on your
expertise. As long as you are reasonable in selecting and employing
the person you hire, you can delegate.
2. Cannot Delegate: Discretionary Acts/Powers, like deciding whether
to purchase or sell building, or to choose who is more worthy of
beneficiary income.
ii. EPIC 1510: Trustee may delegate investment and management functions.

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1. You can do this as long as you exercise reasonable care, skill, and
caution in picking the agent and reviewing/monitoring their
performance. If you are, the statute says that you as the trustee are
not liable for any actions made by the agent as long as you
periodically check on agent.
a. The agent has a duty to the trust to apply reasonable care.
iii. Sometimes the settlor expressly says you can delegate, but courts will construe
this narrowly.
g. Prudent Investor Standard
i. Prudent Investor Standard: Would a prudent person investing the money of
another have made the investment?
ii. EPIC 1503 – Portfolio Approach
1. Look at the portfolio as a whole and as a part of an overall
investment strategy having risk and return objectives reasonably
suited to the fiduciary estate. (Grandparent or a 3-year-old child?)
iii. Specific Things The Trustee Can Consider Under the Portfolio Approach
1. General economic conditions
2. Effect of inflation or deflation
3. Expected tax consequences
4. The role each investment plays within the overall portfolio
5. The expected total return from income and appreciation of capital
6. The need for regularity of income
7. Other resources of the beneficiaries
8. Any special value an asset has to the beneficiary
iv. PROBLEM: Trustee invested $100,000 in JIB. For several years, the stock
paid good dividends and appreciated in value. After an outbreak of mad cow
disease ad reports of E. Coli contamination in a Seattle location, the value of
the stock dropped dramatically. Is the trustee liable for making an improper
investment?
1. Hindsight is allowed; the trustee won’t be liable for this. If they
followed the correct standard, they won’t be liable as long as they did
it prudently.
7. Trustee’s Powers
a. EPIC 7816 – without authorization, trustee may exercise all of the following…
i. Powers conferred by terms of the trust
ii. Powers over the trust property that an unmarried competent owner has over
individually owned property
iii. Exercise of power is subject to fiduciary duties.
8. Trustee’s Liability to Beneficiaries—when trustee breaches a duty.
a. Remedies—
i. Restore the value of the trust property or trust distributions had the breach
not occurred OR profit the trustee made by reason of the breach, which ever
is larger (EPIC 7902)
ii. Specific performance; Removal as trustee;
9. Trustee’s Liability to Third Parties [Common Law (fully liable) v. Statutory]
a. EPIC 7910
i. A trustee is not personally liable on a contract entered into in the trustee’s
fiduciary capacity in the course of administration of the trust estate unless the
trustee fails to reveal the trustee’s representative capacity and identity the trust
estate in the contract.
ii. Trustee is personally liable for an obligation arising from ownership or
control of trust estate property or for a tort committed in the course of
administration only if the trustee is personally at fault.

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_____________________________________________________________________________________

ELDER LAW
Three areas of concern to elderly clients
1. Personal Autonomy – The ability to make your own decisions without someone else
interfering.
a. Incapacitation if clear and convincing evidence of both incapacitated individual and
need for appointment.
2. Medical/Healthcare
3. Financing
Trifecta of Documents
1. Will (trust)
2. Durable Power of Attorney (DPOA)
3. Advance Health Care Directive (AHCD)
Power of Attorney (deals with financial and legal)
1. “Nondurabl e” takes effect immediately and remains in effect until revoked or until the
principal becomes mentally incompetent or dire.
2. “Durabl e” allows the agent to act on the principal’s behalf, even if the principal becomes
incapacitated. (taking out loans, etc. This is very different from a DPOA for HCD. Know
when you would want which)
3. “Springi ng” becomes effective at a future time. It “springs up” upon the happenings of a
specific event identified in the Power of Attorney
4. Can be revoked by the principal at anytime and is automatically revoked upon the principal’s
death.
o Good Faith exception if lacking actual knowledge of the principal’s death
5. Negative: Can become a license to steal – so choose carefully.
Advance Health Care Directive
1. Deals with “pulling the plug”
2. 2 documents
a. Living Will
i. A statement of intent saying, “if I can’t tell you what I want, then pull the
plug.”
b. DPOA for Health Care Decisions
i. Appoints a representative to make the decisions.
ii. The representative is called the “patient advocate” or “surrogate.”
3. Must be 18 and of sound mind
What if a patient doesn’t have one of these documents and is in a coma?
1. Go to Court and be named a guardian/conservator
a. Guardian
i. Can make daily life decisions for “the ward.”
1. Ex: Where she lives, who her doctors are, etc.
b. Cons ervator
i. Can make decisions about the ward’s assets and property.
Guardianship – 5306
1. What you must prove to get a guardianship
a. The individual must be capacitated (lacking sufficient understanding or capacity to
make or communicate informed decisions)
b. The appointment is necessary as a means of providing continuing care and
supervision of the incapacitated individual.
2. The Court will grant only those powers that are necessary.
3. To end the guardianship the Court must determine it is no longer necessary.
Conservator – 5401 (basically controls finances)
1. You can ask that one be appointed for you, or one can petition to be one

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2. Requirem ents
a. The individual is unable to manage property and business affairs effectively.
b. The individual has property that will be wasted or dissipated unless proper
management is provided.
Financial Issues
1. Biggest Cost
a. Long Term Care Facility
b. Prescription Drugs
2. Three Options for Covering thes e Costs
a. 2 Government Programs
i. Medicare – if you’ve worked long enough you get it
ii. Medicaid – if you are poor enough you get it
b. Long Term Car Insurance
i. Usually covers a monetary amount per day or length of time
Medicare (medical assistance for the aged)
1. Have to work 40 quarters (10 years).
2. If you are eligible for Social Security, you are eligible for Medicare (65-years-old)
3. Basic program comes in two parts:
a. Covers up to 150 days in a hospital and only the first 60 days are fully covered
b. Covers up to 100 days in a nursing home (won’t cover long term care) as long as:
i. Receiving skilled nursing care; and
ii. Leading to improved care
c. Outpatient Care
i. Monthly fee of $96
d. Prescription Coverage
i. Get private insurance and then they help reimburse you
Medicaid (medical assistance for the poor and disabled)
• This is a welfare program.
• “Must be poor in income and assets”
o Poor in income (less than $750/month)
o Poor in assets (less than $2,000)
 Your house and 1 car are excluded in calculation of assets
• Covers long term care
o You can be in a nursing home forever and have it paid by the government
Income Protection
• Social Security
o 3 Programs
 Old Age
• Eligible if you have worked 10 years
 Disability
 Supplemental Security Inco me
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Estate and Gift Tax

Formula for Computing the Federal Estate Tax
Gross Estate – Expenses = Net Taxable Estate
Net Taxable Estate x Tax Rate = Tentative Tax Liability
Tentative Tax Liability – Available Tax Credit = Tax Liability

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The Gross Estate

• Includes All
o Cash
o Personal Property
o Real Property
o Bank Accounts (checking, savings, and certificates of deposit)
o Financial Products (stocks, bonds, mutual funds)
o Business Interests (partnership interests or LLC interests)
o Life Insurance
o Retirement Accounts (IRA’s, 401(k)s)
o Property over which the decedent had the right to income or beneficial enjoyment
(living trusts and grantor trusts)
o Property over which the decedent retained the right to revoke (revocable trust)
o Property over which the decedent had a general power of appointment
• Much broader than estate for probate purposes.
• Everything is valued at the time of death
• When you have joint property:
o If husband/wife, when the 1st one dies 50% of the value of the property goes into the
estate.
o If not married, there is no such assumption and the burden is on the taxpayer to
prove the property wasn’t the decedent’s.
• Expenses you can take out of the estate:
o Liabilities owed by the decedent (mortgage, credit card, burial expenses)
o Charitable contributions by will or trust
o Costs of estate administration
o The marital deduction for bequests
 100% deduction for anything you leave your spouse at death
Know how to use the tax tables to determine the tentative tax on the estate.
Explain in General terms what the unified credit for the estate and gift tax is

Estate Tax
A tax is imposed on the total net value of the decedent’s estate as of the date of death. The tax rate is
graduated, increasing from 18% to 35% (2011 rates).
Two Planning Tools for Reducing the Federal Estate Tax
• Maximize the use of the unified credit of married couples
• Use of marital deduction to eliminate tax for first spouse to die.
Available Tax Credit
• 2009 – If your tax is less than $1,455,800 (estates up to 3.5 million), then you don’t pay
anything in death tax.
• 2010 – Estate Tax Repealed
• 2011 – If your tax is less than $345,800 (estates up to 1 million), then you don’t pay
anything in death tax. [Unified Credit—1,730, 800; Value excluded (tentative tax)—5M] Net
taxable estate of 5M = no taxes paid
Federal Gift Tax
• We don’t want people to give stuff away during their lifetime to avoid the estate tax, so we
tax gifts!
Three Tools Used to Minimize the Gift Tax
• Make excluded gifts regularly
o $13,000 per donee, per year is tax free
o Direct payments for education and medical expenses of another are tax-free if the
payments are made directly to the vendor.
o Charitable gifts are always tax-free

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o Gifts to political organizations are always tax free

• Make smart use of the unified credit (remember the gift is valued at the time the gift is made)
• Use exemption for transfers between spouses
Credit Shelter
• Not all income has to be paid to the spouse.
• Whoever receives the income will pay the taxes on it.
o So if the trust receives the income, then the trust pays taxes on it. But taxes on
trusts are about 35% right now so give it to someone else! 
Q-Tip Trust
• You are transferring property to a surviving spouse, so it qualifies for the marital deduction.
• However, if Jane is a big spender this is a good thing to do because it doesn’t give her a lot of
power.
• The trust must provide:
o All income must be paid to the surviving spouse for life;
o Inco me must be paid annually or more often;
o Remainder passes to persons of the decedent’s choosing:
o Executor/personal representative of the decedent’s estate elects to have the property
taxed in the estate of the surviving spouse.
Income Taxation of Trusts
• Gifts of Property
o The donee is taxed on subsequent income
• Gift in Trust
o Settlor deposits property into Trust for the benefit of the Income Beneficiary and
the Principal Beneficiary.
o The Settlor is taxed on the Trust’s income if he retains significant control:
 Significant control is defined as:
• Reversion of the principal within 40 years
• Power to change beneficiaries
• Certain administrative powers
• Power to revoke the Trust
• Income used for the Settlor’s benefit
o If the Settlor is not taxed on the Trust income, then the Trust is taxed on the income
if it retains the income and the Beneficiary is taxed if the Beneficiary gets the
income.
• Gifts to Minors
o Good idea to pay it out to kids because their tax rates will be low
• Q-Tip Trust
o MUST go to the surviving spouse, so the surviving spouse will pay the tax.
• Credit Shelter

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