REMEDIES

Final Examination
Spring 2002
Instructor: Craig Smith

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Time Allotted - Three Hours

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An answer should demonstrate your ability to analyze the facts

presented by the question, to select the material from the
immaterial facts, and to discern the points upon which the case
turns. It should show your knowledge and understanding of the
pertinent principles and theories of law, their relationship to
each other, and their qualifications and limitations. It should
evidence your ability to apply the law to the facts given, and to
reason logically in a lawyer-like manner to a sound conclusion
from the premises adopted. Try to demonstrate your proficiency in
using and applying legal principles rather than a mere memory of
them.

An answer containing only a statement of your conclusions will

receive little credit. State fully the reasons that support them.
All points should be thoroughly discussed. Although your answer
should be complete, you should not volunteer information or
discuss legal doctrines that are not necessary or pertinent to the
solution of the problem.

Unless a question expressly asks for California law, it should be

answered according to legal theories and principles of general
application.
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SPRING 2002
C. SMITH
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QUESTION 1

The "Little 500" is a bicycle race that is annually sponsored by

the Associated Students of Indiana University. (ASIU). Bicyclists
race around the track at the University Stadium in a format
similar to the Indianapolis 500 car race. There is no prize money
for winning the race. Competitors are racing solely for pride and
"bragging rights." In order to keep "ringers" out of the race. (A
"ringer" is anyone who would have so much previous cycling racing
experience so as to have an unfair advantage) race rules prohibit
anyone who has ever held a United States Cycling Federation (USCF)
Class I license from participating in the race. Race rules
provide that in the event of disputes regarding eligibility to
ride in the race, the matter will be submitted to binding
arbitration.

Moe has been recruited as one of four riders on a team competing

in the 2002 race. One month before the race a competing team
complains to ASIU that Moe has previously held a USCF Class I
license. The matter is submitted to binding arbitration, and the
arbitration panel rules that Moe is eligible to ride.

Three days before the race ASIU receives additional information

indicating that Moe is ineligible to ride. They go to court and
ask a judge to issue an order preventing Moe from competing in the
race. Without holding a hearing, the judge issues an order
commanding Moe not to compete. When Moe learns of the order he
consults an attorney and the attorney immediately appeals the
judge's order. How should the appellate court rule? Discuss
fully.
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C. SMITH
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QUESTION 2

Curly bought a season ticket for Los Angeles Kings Hockey games
played at the Staples Center. At the time of the purchase, Curly
signed an invoice stating that upon receipt, "risk of loss or
theft of said tickets shall pass to Curly and that the Staples
Center shall not be obligated to admit subscriber to events unless
tickets delivered hereunder are presented at such time."

Curly lost his tickets, and the Staples Center agreed to sell him
a second ticket allowing Curly to sit in his normal seat. The
agreement required Curly to refund the second payment if Curly
found his lost tickets. The agreement required Curly to vacate
the seat if someone possessing Curly's original ticket tried to
claim the seat.

After receiving the second ticket, Curly attends the next

scheduled Kings game at the Staples Center. Curly is sitting in
his seat when an usher orders him to move. It seems that Larry
has shown up with Curly's original ticket which he brought outside
the Staples Center from a scalper, Moe, just before game time.

Discuss fully, Curly's right to get the price of his lost tickets
from the Staples Center, Larry and Moe.
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C. SMITH
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QUESTION 3

Coppi was a professional bicycle racer. Because of his short

height, 4’9”, he required a custom made bike in order to get a
proper fit. For the upcoming bike racing season, Coppi decided to
buy a new bike. He went to Merlin, a maker of handcrafted
bicycles. Merlin sized Coppi for a custom made bike. Because the
bike was to be unusually small, Merlin had to place a special
order with his bicycle tube supplier, Columbus, to get steel tubes
of a correct size to build a proper bicycle frame. Columbus told
Merlin it would be at least four weeks before the tubes would be
available.

The price of the bike was to be $2,500. Coppi signed a written

agreement promising to pay the purchase price. When the tubes
arrived four weeks later, Merlin immediately began welding them
into a bicycle frame. Two weeks later Coppi injured himself on a
training ride. The injuries were serious and ended his career as
a bicycle racer. He immediately notified Merlin that he did not
want the bicycle. At that point, the bike was less than a week
from being completed. Merlin went ahead and finished the bike.
He prominently displayed the bike in the front window of his shop
hoping it would catch the eye of a potential buyer. Because of
its extremely small size, no one was interested in buying it.
Coppi refused to pay the balance of the purchase price and in
fact, had even asked to have his deposit returned.

A. Merlin eventually files suit against Coppi seeking the balance

of the purchase price. How should the court decide the case of
Merlin v. Coppi? Discuss fully.

B. Same facts as above except, assume that Coppi is never injured

and is ready willing and able to pay for the bike. Just before
the bike is to be delivered Merlin is offered and accepts $5000
from a bike collector to sell the bike to him. Coppi immediately
files suit. Merlin has the $5000 but has not yet delivered the
bike. The first race of the bike season is less than one week
away. Discuss fully, any and all remedies Coppi may have against
Merlin for this breach of contract to sell the bike.
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C. SMITH
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REMEDIES
Final Examination
Spring 2002
Instructor: Craig Smith

MODEL ANSWER

QUESTION 1

Moe appears to be on the receiving end of a temporary restraining

order, a type of injunctive relief. Injunctive relief is
equitable in nature. Entitlement to such relief means that the
plaintiff must show that remedies at law are inadequate and that
the denial of injunctive relief will result in irreparable harm.

Legal remedies, as opposed to equitable ones, are substitutionary

in nature. They attempt to quantify the plaintiff's loss in terms
of money and award that amount to compensate for the harm or
damage caused by the defendant. In the case at hand, monetary
damage that might result from Moe being allowed to compete in the
race, would be difficult to quantify. There is no prize money for
competing in the race, so in the event Moe were to win the race,
if he was allowed to compete, no one would suffer a monetary loss
nor would Moe enjoy a monetary gain. Hence, legal damages would
therefore be inadequate as a remedy.

In determining whether irreparable harm would result if injunctive

relief were denied, the court would compare the harm to be
suffered by the plaintiff to the hardship on the defendant.
Plaintiff will most likely argue that it is not fair to require
him to compete against another racer who is not eligible. But how
this is "harmful" is hard to imagine. It is not as though Moe is
alleged to be under qualified and therefore poses a safety hazard
if allowed to compete. Rather the claim is that he is too skilled.
This does not qualify as irreparable harm. From Moe's point of
view if he is eligible to race, as the arbitration panel found, he
should be allowed to compete. This may be his only opportunity to
race. Most courts would probably say that plaintiff has not met
its burden of showing the hardship he will suffer outweighs the
prejudice to the defendant.

In the appellate court, the court's issuance of an "order"

preventing Moe from competing would be scrutinized using the above
test. The order has all the trappings of a temporary restraining
order (TRO). TRO's are issued to maintain the status quo, before
the court considers the merits of the case. The "status quo" has
been defined as the last peaceable position of the parties before
the dispute erupted. Here, the status quo would be that Moe is
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C. SMITH
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eligible to race. That was the ruling both before and after the
case went to arbitration. Secondly, a TRO can only issue after
notice to the opposing party. There is no indication that Moe got
any notice. Due process requires notice and an opportunity to be
heard. There are exceptions to giving notice where there is a
showing that the party to be restrained may destroy the subject
matter of the lawsuit or abscond from the jurisdiction of the
court if she gets wind of the fact that a TRO is being considered,
but there are no facts in this case to demonstrate that those
exceptions might apply here.

Also, a bond must also be required before a TRO can issue. The
purpose of the bond is to make sure that defendant is compensated
for any harm that results from the issuance of the TRO if it is
later determined that the TRO should not have been issued. The
amount of the bond sets the upper limit on damages the defendant
can recover for wrongful issuance of the TRO. Here, there are no
facts to indicate that a bond was required to be posted. This may
persuade the appellate court to reverse the order granting the
TRO.

Lastly, there is doubt as to whether the judge should have ever

intervened to decide what is essentially a dispute over
"eligibility" to participate in the activities of a private
organization. Ordinarily, courts do not involve themselves in
deciding questions of membership of private clubs, organizations
or societies. These are not governmental affairs. Unless the
private organization membership affects the ability of the
individual who is being excluded to earn a livelihood, courts
don't get involved. This is not a situation of a physician who is
being excluded from a local medical society with a concomitant
affect on her ability to secure hospital privileges. Rather it is
a dispute over participation in a race with none of the
ramifications that might be present in the situation of the
physician. For these reasons the trial court should not have
gotten involved and therefore should be reversed.
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C. SMITH
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QUESTION 2

It appears that either the Staples Center, Larry or Moe (or all
three) have been unjustly enriched. Unjust enrichment occurs when
someone has received a benefit under circumstances where it would
be unjust or unfair to permit them to retain it. If unjust
enrichment is demonstrated, then the remedy to correct it may be
either restitution, a constructive trust, or an equitable lien.

In this case, Curly lost his tickets and was obligated to pay for
a replacement. After he pays for the replacement, his lost ticket
shows up in the hands of Larry. The Staples Center has now been
compensated or paid twice for the same seat. The person who has
made the two payments to Staples is Curly. Why should Staples be
allowed to retain a second payment for the same seat? The fact
that Curly may have been negligent in losing the ticket is no
defense to the claim of unjust enrichment. Curly should be
entitled to the return of the benefit (the second payment) he has
conferred upon Staples. The return of that benefit is called
restitution.

Moe, the scalper, appears to have gained possession of the tickets

under suspect circumstances. The natural inference is that he
either found or stole the tickets. If he stole them, permitting
him to retain the tickets or the proceeds from their resale is
patently unjust. If he found them, he had means of learning the
identity of the true owner and should have made an effort to
return them. So similarly, permitting him to retain the tickets
or their proceeds would be unjust. This is a situation where the
law would say that Moe holds the tickets as constructive trustee
on Curly’s behalf. Equitable title to the tickets belongs to
Curly. A court would order Moe, as constructive trustee, to
return the tickets to Curly. Of course, Moe has sold, or scalped,
the tickets to Larry. However, a constructive trust can follow
the asset being attached to the hands of a subsequent possessor.
Larry would have to return the tickets to Moe under a theory of
constructive trust unless he can show that he is a bona fide
purchaser (BFP) for value. A BFP, will cut off a constructive
trust. However, to qualify as a BFP, Larry would have to show
that he purchased the tickets in good faith, and not under
circumstances under which he would have notice that the were
stolen or obtained under suspicious circumstances. This would be
a close call because people buy tickets from scalpers all the
time, so this very well may cut off Curly’s rights to receive the
tickets from Larry. However, if he can overcome the BFP defense
he could receive either the tickets from Larry or the proceeds of
the sale from Moe. If Moe sold them for more than face value,
Curly could get any increase in price or profit that Moe received.
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Under a constructive trust the measure of recovery is the gain of

the defendant, not the loss of the plaintiff, and Moe would hold
any appreciation of the asset or profit as trustee for Curly as
well. A constructive trust is an effective remedy for an asset
that has appreciated because it entitles the constructive trustor
to any increase in value of the asset.

If on the other hand, Moe sold the tickets for less than face
value, a more appropriate remedy might be an equitable lien. Once
again, Curly would have to overcome the BFP defense. If he is
able to do so, then he effect has a security interest in the
tickets and his monetary loss could be satisfied by forcing a sale
of the tickets, and then be compensated out of the proceeds of the
sale.
REMEDIES FINAL EXAMINATION
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C. SMITH
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QUESTION 3

A. Breach by buyer. This is a sale of goods. Therefore it is

governed by the provisions of Article 2 of the UCC. The measure of
damages when the buyer breaches is the difference between the
contract price and the market price of the goods. The UCC
requires the seller to resell the goods on the open market. The
resale price normally determines the market price. If the seller
resells in good faith for less than the price the goods were under
contract for, he can recover that amount together with any
incidental or consequential damages. Examples of incidental
damages might be increased storage, shipping or interest cost.
Examples of consequential damages would be loss of profits. If the
goods are unsuitable for resale in the normal course of the
seller's business, or if efforts to resell the goods are
unavailing, the seller may bring an "action for the price." This
is in effect a forced sale in that it forces the buyer to pay for
the goods at the contract price. Usually this is only available
when the goods are unusual or ar peculiarly suited only for the
buyer. Here, the bicycle that was specially made was of an
unusually small size and the seller's effort to "unload" the goods
was unsuccessful. Hence, this would be an appropriate situation
for an action for the price.

B. Seller's breach. When the seller breaches and the buyer

"covers" by making a substitute purchase the buyer's remedy is
the difference between the contract price and the cost of the
cover, together with any incidental or consequential damages. If
the buyer does not cover, the measure of damages is the difference
between the contract price and the market price when the buyer
learned of the breach. If the buyer fails to cover, he is not
entitled to recover incidental or consequential damages.

If the goods are unique (or in other appropriate circumstances)

the buyer may be entitled to specific performance. Other proper
circumstances may include an inability to cover. Here the bike is
unusual and one of a kind. The buyer may have trouble finding a
suitable substitute on the open market.