California Attorney's Guide to Damages

Chapter Outlines

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1

Contract

Victor B. Harris

I.  INTRODUCTION  §1.1

II.  ANALYSIS OF CONTRACT DAMAGES PROBLEMS

A.  Negotiation and Drafting Stage  §1.2

1.  Improving Amount of Recovery  §1.3

2.  Limiting Amount of Recovery  §1.4

3.  Venue and Arbitration Clauses  §1.5

B.  Handling Potential or Actual Breach Situations Before Litigation  §1.6

1.  When Performance Will Continue

a.  Notice of Breach and Demand for Performance  §1.7

b.  Protection of Security Interests  §1.8

c.  Avoidance of Future Breach  §1.9

d.  Avoidance of Aggravation of Damages  §1.10

e.  Documentation  §1.11

2.  When Performance Will Not Continue

a.  Notice of Claim and Protection of Security Rights  §1.12

b.  Analysis and Proof of Client’s Recoverable Damages  §1.13

3.  Alternative or Supplemental Remedies  §1.14

4.  Alternative or Supplemental Causes of Action  §1.15

C.  Litigation Checklist  §1.16

III.  POSSIBLE ITEMS OF RECOVERY

A.  Measure of Damages

1.  Controlling Civil Code Provisions  §1.17

2.  Rule of Hadley v Baxendale: General and Special Damages  §1.18

B.  Specific Items Recoverable

1.  Loss of Profits and Benefits  §1.19

2.  Interest  §1.20

3.  Attorney Fees

a.  General Rule  §1.21

b.  Right to Reciprocal Recovery of Attorney Fees (CC §1717)  §1.22

(1)  Examples of Recovery Under CC §1717  §1.23

(2)  Recovery of Attorney Fees Under CC §1717 by Strangers to Contract  §1.24

(3)  Recovery of Attorney Fees by Attorney Litigants and “In-House” Counsel Under CC §1717  §1.25

(4)  Determination of Prevailing Party Under CC §1717  §1.26

(5)  Limits of CC §1717  §1.27

(6)  Award of CC §1717 Attorney Fees in Arbitration  §1.28

(7)  Procedure for Recovery Under CC §1717  §1.29

c.  Recovery Under Statutes Other Than CC §1717  §1.30

d.  Recovery for Bad Faith Breach of Contract and Breach of Fiduciary Duty  §1.31

e.  Recovery Under “Tort of Another” or “Third Party Tort” Doctrine  §1.32

4.  Expert Witness Fees  §1.33

5.  Exemplary and Nominal Damages

a.  General Rule  §1.34

b.  Exemplary Damages May Be Available in Cases Involving Breach of Insurance Contract or Existence of Independent Tort  §1.35

c.  Exemplary Damages Not Available for Bad Faith Denial of Contract’s Existence  §1.36

d.  Proof of Defendant’s Financial Condition  §1.37

6.  Mental Distress or Physical Suffering  §1.38

7.  Loss of Goodwill  §1.39

IV.  LIMITATIONS ON AMOUNT OF DAMAGES

A.  Uncertain and Speculative Damages  §1.40

B.  Mitigation of Damages  §1.41

C.  Liquidated Damages

1.  Validity and Scope  §1.42

2.  In Public Contracts  §1.43

3.  Liquidated Damages as “Processing Charges” and “Late Fees”  §1.44

D.  Disclaimer of Warranties  §1.45

E.  Disclaimer and Limitation of Damages  §1.46

V.  SPECIFIC BREACH SITUATIONS; RULES AND APPROACHES TO CONTRACT DAMAGES

A.  Total Failure to Perform  §1.47

B.  Partial Performance  §1.48

C.  Delay in Performance  §1.49

D.  Defect in Performance  §1.50

E.  Prevention or Obstruction of Performance  §1.51

F.  Failure to Pay Money  §1.52

G.  Breach of Employment, Service, or Agency Contracts  §1.53

1.  Foley v Interactive Data Corp.  §1.54

2.  Cases After Foley v Interactive Data Corp.  §1.55

H.  Damages for Unauthorized Services  §1.56

I.  Breach of Insurance Contracts

1.  Breach of Covenant of Good Faith and Fair Dealing  §1.57

2.  Examples  §1.58

J.  Breach of Contracts to Negotiate Agreements  §1.59

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2

Real Estate Seller/Buyer

David Dimitruk
Jane L. O’Hara Gamp
C. Darrell Sooy

I.  INTRODUCTION  §2.1

II.  ESSENTIALS OF DAMAGES ACTION

A.  Nature of Action; Jurisdiction; Venue

1.  Legal or Equitable Nature of Action  §2.2

2.  Jurisdiction  §2.3

3.  Venue  §2.4

B.  Establishing Breach  §2.5

C.  Inadequacy of Remedies  §2.6

D.  Selection of Remedies  §2.7

III.  SELLER’S BREACH

A.  Buyer’s First Steps After Seller’s Breach  §2.8

B.  Buyer’s Damages

1.  General Damages Under CC §3306  §2.9

2.  Damages for Breach Other Than Failure to Convey Title  §2.10

3.  Prejudgment Interest  §2.11

4.  Attorney Fees  §2.12

5.  Punitive Damages; Emotional Distress  §2.13

C.  Seller’s Defenses  §2.14

IV.  BUYER’S BREACH

A.  Purchase Agreement and Installment Land Contract Distinguished  §2.15

B.  Breach of Purchase and Sale Agreement  §2.16

1.  Seller’s Remedies

a.  First Steps After Breach  §2.17

b.  Disposition of Deposit

(1)  General Considerations  §2.18

(2)  No Liquidated Damages Clause

(a)  Failure of Condition  §2.19

(b)  Buyer’s Breach  §2.20

(3)  Liquidated Damages

(a)  Agreements Executed Before July 1, 1978  §2.21

(b)  Agreements Executed on or After July 1, 1978  §2.22

(i)  Residential Real Property  §2.23

(ii)  Nonresidential Real Property  §2.24

c.  Seller’s Damages

(1)  General Damages Under CC §3307  §2.25

(2)  Effect of Market  §2.26

(3)  Discounting Price to Cash Equivalent  §2.27

(4)  Proof of Damages  §2.28

(5)  Special Damages

(a)  Resale Expenses  §2.29

(b)  Broker’s Commission  §2.30

(c)  Other Expenses  §2.31

2.  Buyer’s Defenses and Offsets

a.  Antideficiency Bar  §2.32

b.  Other Defenses and Offsets  §2.33

V.  ELEMENTS OF FRAUD  §2.34

A.  Damages When Buyer Is Victim

1.  Three Rules  §2.35

2.  Measure of Damages Compared  §2.36

3.  Actual Value Means Market Value

a.  Proving Market Value  §2.37

b.  Use of Opinion Testimony  §2.38

c.  Methods of Establishing Value  §2.39

4.  Additional Damages  §2.40

a.  Labor  §2.41

b.  Repairs and Improvements  §2.42

c.  Expenses  §2.43

d.  Lost Profits  §2.44

e.  Personal Injuries and Emotional Distress  §2.45

f.  Interest  §2.46

g.  Punitive Damages  §2.47

h.  Attorney Fees  §2.48

5.  Fraud by Fiduciaries  §2.49

6.  Damages Versus Equitable Remedies  §2.50

B.  Damages When Seller Is Victim

1.  Same Remedies and Defenses  §2.51

2.  Special Lost Profits Rule  §2.52

3.  Statutory Protection for Sellers of Residential Real Property  §2.53

C.  LITIGATION CONSIDERATIONS IN FRAUD ACTIONS

1.  Setoff  §2.54

2.  Mitigation  §2.55

3.  Rents  §2.56

4.  Selling Property; Involuntary Foreclosure  §2.57

5.  Contract Performance  §2.58

6.  Consumer Recovery Account  §2.59

VI.  INSTALLMENT LAND SALE CONTRACTS  §2.60

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3

Labor

Robert M. Cassel
Barbara A. Lawless

I.  ACTIONS UNDER FEDERAL STATUTES

A.  Labor Management Relations Act of 1947

1.  Purpose and Structure  §3.1

2.  Federal Preemption and Jurisdiction  §3.2

3.  Unfair Labor Practices  §3.3

4.  Procedure  §3.4

5.  Awards to Employees

a.  Partial Shutdown to “Chill Unionism”  §3.5

b.  Discrimination by Employer for Union Activity

(1)  Restoration of Position and Back Pay  §3.6

(2)  What Constitutes Back Pay

(a)  Inclusions  §3.7

(b)  Exclusions  §3.8

(c)  Reductions  §3.9

(d)  Period for Which Allowed  §3.10

(e)  Burden of Proof  §3.11

(f)  NLRB Rules on Back Pay  §3.12

(3)  Back Pay Calculated on Quarterly Basis  §3.13

(4)  Back Pay Under IRCA  §3.13A

(5)  Successor Employer  §3.14

c.  Employer’s Refusal to Bargain  §3.15

d.  Employer Domination of Union  §3.16

e.  “Runaway Shops”  §3.17

f.  Unlawful Unilateral Activity  §3.18

6.  Employer and Union Liability  §3.19

7.  Awards to Employers

a.  Union’s Refusal to Bargain  §3.20

b.  Damage Actions Under §303 of LMRA  §3.21

c.  Actions for Breach of Collective Bargaining Agreement

(1)  When Federal Law Applies  §3.22

(2)  Measure and Proof of Damages  §3.23

B.  Labor-Management Reporting and Disclosure Act of 1959  §3.24

1.  Compensatory Damages  §3.25

2.  Attorney Fees  §3.26

3.  Punitive Damages  §3.27

4.  Elections  §3.28

5.  Cause of Action Against Employer  §3.29

C.  Rehabilitation Act of 1973  §3.30

D.  Americans with Disabilities Act of 1990  §3.31

E.  Railway Labor Act  §3.32

1.  Major and Minor Disputes  §3.33

2.  Back Pay  §3.34

3.  Attorney Fees  §3.35

F.  Sherman and Clayton Antitrust Acts  §3.36

1.  Examples  §3.37

2.  Employers Exempt  §3.38

G.  Fair Labor Standards Act of 1938  §3.39

1.  Exemptions  §3.40

2.  Remedies  §3.41

3.  Defenses  §3.42

4.  Gender Discrimination  §3.43

5.  Examples  §3.44

6.  Statute of Limitations  §3.45

H.  Age Discrimination in Employment Act  §3.46

I.  Veteran’s Reemployment Rights  §3.47

J.  Title VII of Civil Rights Act of 1964

1.  Prohibition of Discrimination in Employment  §3.48

2.  Back Pay Awards  §3.49

a.  Back Pay Formula  §3.50

b.  Back Pay Defined  §3.51

c.  Bona Fide Offers of Employment  §3.52

d.  Duplicate Pay  §3.53

e.  Front Pay  §3.54

f.  Mental Distress Damages  §3.55

g.  Prejudgment Interest  §3.56

h.  Good Faith  §3.57

i.  Equivalent Employment  §3.58

j.  Unemployment Benefits  §3.59

3.  Seniority  §3.60

4.  Exemplary Damages  §3.61

5.  Attorney Fees  §3.62

6.  Civil Rights Act of 1991  §3.63

7.  Civil Rights Acts of 1866 and 1871  §3.64

K.  Employee Retirement Income Security Act  §3.65

1.  Preemption of State Law  §3.66

2.  Coverage  §3.67

3.  Reporting and Disclosure  §3.68

4.  Damages  §3.69

5.  Remedies  §3.70

6.  Attorney Fees  §3.71

7.  Punitive Damages  §3.72

8.  Measure of Damages  §3.73

9.  Breach by Fiduciary  §3.74

L.  Walsh-Healey Act  §3.75

M.  Davis-Bacon Act  §3.76

N.  Federal Employee Protections

1.  Federal Service Labor Management Relations Act  §3.77

a.  Employees’ Grievances  §3.78

b.  Back Pay and Attorney Fees  §3.79

2.  First Amendment Rights and Political Activity  §3.80

3.  Privacy  §3.81

II.  ACTIONS UNDER CALIFORNIA STATUTES

A.  Labor-Management Relations  §3.82

B.  Agricultural Labor Relations Act  §3.83

C.  Restraint of Trade Under Cartwright Act  §3.84

D.  Use of State Funds for Anti-Union Activities  §3.84A

E.  Timely Payment of Wages  §3.85

1.  Collective Bargaining Agreements  §3.86

2.  Wage Periods  §3.87

3.  Vacation Benefits  §3.88

4.  Meal and Rest Periods  §3.88A

5.  Berman Hearing  §3.89

6.  Enforcement  §3.90

7.  Labor Code Private Attorneys General Act of 2004  §3.90A

F.  Indemnity for Work-Related Expenses or Losses  §3.91

G.  Illegal Termination of Employment  §3.92

1.  Statutory Wrongful Termination Claims  §3.93

2.  Public Employee Termination  §3.94

3.  Damages for Wrongful Termination

a.  Contract Damages  §3.95

b.  Tort Damages  §3.96

4.  Exhaustion of Administrative Remedies  §3.97

5.  Additional Damages Claims in Wrongful Termination Cases  §3.98

6.  Privacy Rights  §3.99

H.  Equal Pay, Minimum Wage, and Overtime Pay Provisions  §3.100

I.  Miscellaneous Statutes

1.  Solicitation of Employees by Misrepresentation  §3.101

2.  Misrepresentation Concerning Former Employee  §3.102

3.  Interference With Employees’ Political Activities  §3.103

4.  Commission Contracts by Out-of-State Employers  §3.104

5.  Fair Employment and Housing Act Damages  §3.105

III.  DAMAGE AWARDS IN ARBITRATION UNDER COLLECTIVE BARGAINING AGREEMENTS

A.  Arbitration Favored by Courts  §3.106

B.  Computation of Damages  §3.107

C.  Union or Employee Grievances  §3.108

D.  Employer Grievance: Violation of Express or Implied No-Strike Commitment  §3.109

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4

Landlord/Tenant

Myron Moskovitz
Diana D. Sam

I.  SCOPE OF CHAPTER  §4.1

II.  AGREEMENT TO EXECUTE LEASE

A.  Prospective Landlord’s Breach

1.  Measure of Damages

a.  General Damages  §4.2

b.  Special Damages  §4.3

c.  Attorney Fees  §4.4

d.  Exemplary Damages  §4.5

e.  Interest  §4.6

2.  Burden of Proof  §4.7

3.  Statute of Limitations  §4.8

B.  Prospective Tenant’s Breach  §4.9

III.  LANDLORD’S BREACH

A.  Measure of Damages for Breach of Duty to Deliver Possession

1.  General Damages  §4.10

2.  Proof of Rental Value  §4.11

3.  Special Damages  §4.12

4.  Attorney Fees; Interest; Exemplary Damages  §4.13

B.  Breach of Covenant of Quiet Enjoyment

1.  What Constitutes Breach  §4.14

2.  Measure of Damages

a.  General Damages

(1)  Actual or Constructive Eviction  §4.15

(2)  Interruption of Tenant’s Beneficial Enjoyment  §4.16

b.  Special Damages  §4.17

c.  Attorney Fees and Interest  §4.18

d.  Exemplary Damages  §4.19

3.  Breach of Quiet Enjoyment as Tort  §4.20

4.  Statute of Limitations  §4.21

C.  Forcible Entry or Detainer

1.  Nature of Action  §4.22

2.  Measure of Damages

a.  General Damages  §4.23

b.  Special Damages  §4.24

c.  Exemplary Damages  §4.25

d.  Attorney Fees; Interest; Nominal Damages  §4.26

3.  Statute of Limitations  §4.27

D.  Breach of Lease Covenants

1.  Award of General and Special Damages  §4.28

2.  Covenant Against Competition  §4.29

3.  Covenant to Repair  §4.30

4.  Covenant to Build  §4.31

5.  Covenant to Pay for Improvements  §4.32

6.  Attorney Fees; Exemplary Damages; Interest  §4.33

7.  Landlord’s Defenses  §4.34

E.  Breach of Statutory Duty to Repair

1.  Civil Code §§1941–1942  §4.35

2.  Retaliatory Eviction  §4.36

3.  Housing Codes  §4.37

F.  Breach of Warranty of Habitability

1.  Availability of Damages  §4.38

2.  Statutory Damages; Abatement  §4.39

3.  General Damages

a.  Difference in Value or Percentage Reduction  §4.40

b.  Discomfort and Annoyance  §4.41

4.  Special Damages  §4.42

5.  Punitive Damages  §4.43

6.  Costs and Attorney Fees  §4.44

G.  Disconnecting Utility Services  §4.45

H.  Wrongful Withholding of Tenant’s Personal Property

1.  Tenant’s Remedies  §4.46

2.  Statute of Limitations  §4.47

I.  Landlord’s Violation of Local Rent Control Ordinance

1.  Damages for Rent Overcharges  §4.48

2.  Damages for Unlawful Evictions  §4.49

3.  Attorney Fees  §4.50

4.  Liability of New Owner  §4.51

J.  Security Deposits

1.  In General  §4.52

2.  Landlord’s or Landlord Successor’s Retention of Deposit  §4.53

3.  Attorney Fees and Interest  §4.54

4.  Statute of Limitations  §4.55

IV.  TENANT’S BREACH

A.  Use of Property for Illegal Purposes

1.  Damages  §4.56

2.  Statute of Limitations  §4.57

B.  Use for Other Than Intended Purpose

1.  Obligation and Damages  §4.58

2.  Statute of Limitations  §4.59

C.  Waste

1.  Damages  §4.60

2.  Statute of Limitations  §4.61

D.  Breach of Statutory Duty to Repair  §4.62

E.  Breach of Lease Covenants

1.  Damages for Breach  §4.63

2.  Statute of Limitations  §4.64

3.  Rent Covenant

a.  Obligation and Damages  §4.65

b.  Interest  §4.66

4.  Covenant to Remain in Business  §4.67

5.  Covenant to Improve  §4.68

6.  Covenant to Repair  §4.69

7.  Covenant Against Assignment or Subletting  §4.70

8.  Covenant to Surrender  §4.71

9.  Covenant to Surrender in as Good Condition as Received  §4.72

10.  Covenant to Pay Taxes  §4.73

11.  Covenant to Insure  §4.74

F.  Wrongful Removal of Fixtures

1.  General Damages  §4.75

2.  Exemplary Damages  §4.76

3.  Statute of Limitations  §4.77

G.  Termination for Tenant’s Breach or Abandonment

1.  Definition of Abandonment  §4.78

2.  Measure of Damages

a.  Termination of Lease (CC §1951.2)  §4.79

b.  Continuation of Lease (CC §1951.4)  §4.80

c.  Liquidated Damages; Equitable Relief; Nonexclusivity of Remedies  §4.81

d.  Statute of Limitations  §4.82

H.  Holding Over After Lease Expiration

1.  Election to Treat Tenant as Trespasser  §4.83

2.  Holdover Tenant’s Liability to New Tenant  §4.84

3.  Statute of Limitations  §4.85

I.  Unlawful Detainer

1.  Back Rent  §4.86

2.  Damages Caused by Unlawful Detainer  §4.87

3.  Prejudgment Interest  §4.88

4.  Costs

a.  Awarded to Prevailing Party  §4.89

b.  Allowable Costs and Expenses  §4.90

c.  Procedure for Claiming Costs  §4.91

d.  Limitations on Costs  §4.92

5.  Attorney Fees

a.  Basis for Recovery  §4.93

b.  Determining Who Is Prevailing Party

(1)  Party Recovering “Greater Relief”  §4.94

(2)  Effect of Dismissal  §4.95

c.  Limits on Recovery by Prevailing Party  §4.96

d.  Determining Amount of Fees  §4.97

e.  Fees for Services Before Complaint Filed  §4.98

f.  Award of Fees Against Successors in Interest  §4.99

g.  Attorney Fees on Appeal  §4.100

h.  Procedure for Claiming Fees  §4.101

(1)  Basis of Award Governs Procedure

(a)  Contractual Attorney Fees  §4.102

(b)  Statutory Attorney Fees  §4.103

(2)  Time Limits for Claiming Attorney Fees  §4.104

i.  Statute of Limitations  §4.105

V.  MISCELLANEOUS DAMAGE FACTORS

A.  Liquidated Damages  §4.106

B.  Proof of Damages  §4.107

C.  Mitigation  §4.108

D.  Attorney Fees  §4.109

E.  Expert Witness Fees  §4.110

F.  Costs  §4.111

G.  Certainty of Damages  §4.112

H.  Nominal Damages  §4.113

I.  Damages Nondischargeable in Bankruptcy  §4.114

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5

Injury to Property

Stephen L. R. McNichols

I.  SCOPE OF CHAPTER  §5.1

II.  NUISANCE

A.  General Definition  §5.2

B.  Nuisance Per Se  §5.3

C.  Categories of Nuisance Under CC §3479  §5.4

1.  Objective Standard Under CC §3479  §5.5

2.  Balancing Equities Required Under CC §3479  §5.6

3.  Exception for Activities Expressly Authorized by Statute  §5.6A

D.  Public Nuisance

1.  Definition  §5.7

2.  Standing  §5.8

E.  Private Nuisance

1.  Definition  §5.9

2.  Threat of Future Injury  §5.10

3.  Blockage of Air, Light, or View  §5.11

F.  Nuisance That Is Both Public and Private  §5.12

G.  Distinction Between Temporary or Continuing Nuisances and Permanent Nuisances

1.  Importance of Classification for Selection of Remedies  §5.13

2.  Factors  §5.14

3.  Election by Plaintiff  §5.15

4.  Courts’ Preference for Continuing Nuisance  §5.16

III.  TRESPASS

A.  Definition  §5.17

B.  Distinction Between Nuisance and Trespass  §5.18

IV.  ENCROACHMENT  §5.19

V.  REMEDIES AND DAMAGES FOR PUBLIC NUISANCE  §5.20

VI.  DAMAGES AND OTHER REMEDIES FOR PRIVATE NUISANCE AND TRESPASS  §5.21

A.  Equitable or Legal Action?  §5.22

B.  Jurisdiction  §5.23

C.  Venue  §5.24

D.  Right to Self-Help  §5.25

E.  Injunction  §5.26

1.  Preliminary Injunction  §5.26A

2.  Injunctive Relief for Nuisance and Trespass  §5.26B

3.  Injunctive Relief for Encroachment  §5.26C

F.  Tort Measure of Damages  §5.27

1.  Continuing Nuisance  §5.28

2.  Permanent Nuisance  §5.29

3.  Continuing Trespass  §5.30

4.  Permanent Trespass  §5.31

G.  Injury to Products of Real Property  §5.32

H.  Damage, Destruction, or Removal of Fixtures or Personal Property  §5.33

I.  Injury to Persons  §5.34

J.  Lost Profits  §5.35

K.  Attorney Fees  §5.36

L.  Prejudgment Interest  §5.37

M.  Punitive Damages  §5.38

N.  Statutory Limitations on Recovery  §5.39

VII.  DEFENSES

A.  Comparative Fault  §5.40

B.  Statutes of Limitations and Repose

1.  Public Nuisance and Trespass  §5.41

2.  Private Nuisance and Trespass  §5.42

a.  Permanent Nuisance and Trespass  §5.43

b.  Continuing Nuisance and Trespass  §5.44

c.  “Improvement” as Continuing Nuisance  §5.44A

d.  Special Rules for Pollution Cases  §5.45

C.  Laches  §5.46

D.  Coming to Nuisance  §5.47

E.  Consent  §5.48

F.  Balancing Equities  §5.49

G.  Due Care  §5.50

H.  Use Consistent With Applicable Zoning  §5.51

I.  Separation of Powers and Statutory Immunity  §5.52

J.  Scope of Injunction  §5.53

VIII.  RELATED ACTIONS  §5.54

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6

Intellectual Property Infringement and Misappropriation

Surjit P. Soni
Leo E. Lundberg, Jr.

I.  PATENT INFRINGEMENT

A.  Statutory Basis for Damages and Statute of Limitations  §6.1

B.  Lost Profits  §6.2

1.  Requirement of Causation in Fact  §6.3

2.  Panduit Causation Test  §6.4

3.  Measure of Lost Profits  §6.5

4.  Lost Profits for Patented Products  §6.6

5.  Lost Profits for Unpatented Products  §6.7

6.  Entire Market Value Rule  §6.8

7.  Price Erosion Damages  §6.9

8.  Absence of Established Royalty Rate  §6.10

9.  Factors That Serve as Basis for Reasonable Royalty Rate  §6.11

10.  Georgia-Pacific Factors  §6.12

C.  Willful Infringement Damages  §6.13

D.  Prejudgment Interest  §6.14

E.  Attorney Fees  §6.14A

II.  COPYRIGHT INFRINGEMENT

A.  Statutory Basis for Damages and Statute of Limitations  §6.15

B.  Actual Damages  §6.16

1.  Loss in Value of Copyrighted Material  §6.17

2.  Value of Use  §6.18

3.  Plaintiff’s Lost Profits

a.  Lost Revenue as Result of Infringement  §6.19

b.  Plaintiff’s Costs Must Be Deducted to Determine Lost Profits  §6.20

C.  Defendant’s Profits  §6.21

1.  Gross Revenues Attributable to Infringement  §6.22

2.  Deductible Expenses  §6.23

3.  Apportionment of Profits Between Infringing and Noninfringing Elements  §6.24

D.  Statutory Damages  §6.25

E.  Costs and Attorney Fees  §6.26

F.  Prejudgment Interest  §6.26A

G.  Damages Under Digital Millennium Copyright Act (DMCA)  §6.27

H.  Illegality No Defense to Damages  §6.27A

III.  TRADEMARK INFRINGEMENT

A.  Lanham Act and Statute of Limitations  §6.28

1.  Defendant’s Profits  §6.29

2.  Plaintiff’s Damages  §6.30

a.  Treble Damages and Punitive Damages  §6.31

b.  Statutory Damages for Counterfeit Marks and for Violation of 15 USC §1125(d)(1)  §6.31A

c.  Prejudgment Interest and Attorney Fees  §6.32

B.  California Trademark Law  §6.33

IV.  TRADE SECRET MISAPPROPRIATION AND STATUTE OF LIMITATIONS  §6.34

A.  Actual Damages  §6.35

B.  Unjust Enrichment  §6.36

C.  Reasonable Royalty  §6.37

D.  Punitive Damages  §6.38

E.  Attorney Fees  §6.39

V.  REMEDIES FOR MISAPPROPRIATION UNDER OTHER COMMON LAW THEORIES

A.  Possible Preemption of Claims Not Based on CUTSA  §6.39A

B.  Fraud (Deceit) Damages and Statute of Limitations  §6.40

1.  Lost Profits as Additional or Consequential Damages for Nonfiduciary Claims  §6.41

2.  Lost Profits for Claims Against Fiduciaries  §6.42

C.  Conversion Damages and Statute of Limitations  §6.43

D.  Restitution Based on Quasi-Contract/Unjust Enrichment  §6.44

1.  General Measure of Restitution for Quasi-Contract/Unjust Enrichment  §6.45

2.  Restitution for Lost Profits Attributable to Property  §6.46

3.  Constructive Trust Remedy

a.  Nature of Constructive Trust Remedy  §6.47

b.  Constructive Trust and Quasi-Contract Claims Based on Unjust Enrichment  §6.48

c.  Property Subject to Constructive Trust  §6.49

VI.  CHECKLIST: SUGGESTED DISCOVERY  §6.50

VII.  REQUIRED FACTUAL BASIS FOR OPINIONS OF EXPERTS

A.  Federal Rules of Evidence

1.  Permitted Basis for Expert’s Opinion  §6.51

2.  Procedure for Establishing Foundation of Expert Testimony  §6.52

3.  Application of Reliable Data Requirement  §6.53

B.  California Evidence Code

1.  Permitted Basis for Expert’s Opinion  §6.54

2.  Need to Establish Foundation  §6.55

3.  Procedure for Establishing Foundation  §6.56

4.  Application of Reliable Data Requirement  §6.57

VIII.  INSURANCE AS SOURCE FOR COLLECTION OF DAMAGES  §6.57A

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7

Tax Aspects

Robert W. Wood

I.  IMPORTANCE OF TAX RULES IN TERMINATION OF LITIGATION

A.  Role of Taxation in Litigation  §7.1

B.  Real Effects on Position of Parties  §7.2

II.  DISTINCTION BETWEEN SETTLEMENTS AND JUDGMENTS  §7.3

A.  Reference to Underlying Claim: Origin of Claim  §7.4

1.  Origin of Claim  §7.5

2.  Sale or Exchange for Capital Treatment  §7.6

B.  Lost Profits  §7.7

C.  Harm to Capital Assets  §7.8

D.  Involuntary Conversions  §7.9

E.  Gain on Sale of Residence  §7.10

F.  Reference to Basis of Capital Assets  §7.11

G.  Goodwill  §7.12

H.  Personal Physical Injuries  §7.13

I.  Back Pay  §7.14

III.  CLASSIFYING OTHER RECOVERIES  §7.15

A.  Income Subject to IRC §61  §7.16

B.  Continued Reference to Underlying Claims  §7.17

IV.  RECOVERIES FOR BUSINESS INJURIES

A.  Lost Profits  §7.18

B.  Damage to Goodwill and Other Capital Recoveries  §7.19

C.  Timing of Income  §7.20

D.  Distinction Between Business Injuries and Personal Injury Damages [Deleted]  §7.21

V.  CHARACTER OF PAYMENTS: REFERENCE TO UNDERLYING TRANSACTION  §7.22

A.  Types of Lost Profit Recoveries  §7.23

1.  Noncapital Recoveries  §7.24

2.  Commission Income  §7.25

3.  Income Versus Nontaxable Bequest  §7.26

4.  Miscellaneous Lost Profit Recoveries  §7.27

B.  Fraud, Misrepresentation, and Breach of Fiduciary Duty Claims

1.  Fraud Claims  §7.28

2.  Breach of Fiduciary Duty Claims  §7.29

3.  Securities Fraud in Reorganization  §7.30

4.  Operation of Tax Benefit Rule  §7.31

5.  Compensation for Damages Causing Additional Federal Income Tax  §7.32

6.  Recovery for Breach of Covenant Not to Compete  §7.33

7.  Patent Infringement Damages  §7.34

8.  Discharge of Debt  §7.35

VI.  TAXATION OF VARIOUS BUSINESS RECOVERIES

A.  Recoveries Involving Stock  §7.36

1.  Patent Infringement Actions  §7.37

2.  Recoveries Under Liquidated Damages Provisions  §7.38

B.  Miscellaneous Business Injuries

1.  Presumption of Lost Profits Recovery  §7.39

2.  Recoveries Under Contract Rights  §7.40

3.  Proving Capital Asset Status and Basis  §7.41

4.  Allocating Among Claims  §7.42

5.  IRA Contributions  §7.43

6.  Involuntary Conversions  §7.44

7.  Settlement Versus Judgment  §7.45

8.  Cases Settling on Appeal  §7.46

9.  Semantics and Other Issues Involving “Interest”  §7.47

10.  Antitrust Recoveries  §7.48

C.  Tax Treatment of Recovered Attorney Fees  §7.49

1.  The Supreme Court’s Decision in Commissioner v Banks  §7.49A

2.  Deduction for Attorney Fees in Unlawful Discrimination Cases  §7.49B

3.  Pre-Banks Cases: The Split in the Circuit Courts [Deleted]

a.  First Circuit Authority—Applying Massachusetts Law [Deleted]  §7.49C

b.  Second Circuit Authority—Applying Vermont Law [Deleted]  §7.49D

c.  Third Circuit Authority—Applying Pennsylvania Law [Deleted]  §7.49E

d.  Fourth Circuit Authority—Applying North Carolina Law [Deleted]  §7.49F

e.  Fifth Circuit Authority—Applying Alabama and Texas Law [Deleted]

(1)  Applying Alabama Law [Deleted]  §7.49G

(2)  Applying Texas Law [Deleted]  §7.49H

f.  Sixth Circuit Authority [Deleted]

(1)  Applying Michigan Law [Deleted]  §7.49I

(2)  Banks: Reversed by the United States Supreme Court [Deleted]  §7.49J

g.  Seventh Circuit Authority—Applying Wisconsin Law [Deleted]  §7.49K

h.  Eighth Circuit Authority—Applying Iowa Law [Deleted]  §7.49L

i.  Ninth Circuit Authority—Applying Arizona, California, Alaska, and Oregon Law [Deleted]

(1)  Applying Arizona Law [Deleted]  §7.49M

(2)  Applying California Law [Deleted]  §7.49N

(3)  Applying Alaska Law [Deleted]  §7.49O

(4)  Applying Oregon Law [Deleted]  §7.49P

j.  Tenth Circuit Authority—Applying Missouri Law [Deleted]  §7.49Q

k.  Eleventh Circuit Authority—Applying Alabama Law [Deleted]  §7.49R

l.  Federal Circuit Precedent [Deleted]  §7.49S

D.  Net Versus Gross Recoveries Illustrated [Deleted]  §7.50

E.  Position of Internal Revenue Service and Various Circuit Courts of Appeal [Deleted]  §7.51

1.  Srivastava v Commissioner  §7.52

2.  Benci-Woodward v Commissioner  §7.53

3.  Estate of Clarks v United States  §7.54

4.  Davis v Commissioner  §7.55

5.  Coady v Commissioner  §7.56

6.  Banaitis v Commissioner  §7.57

7.  Hukkanen-Campbell v Commissioner  §7.58

8.  Alexander v Commissioner  §7.59

9.  Syphrett v Commissioner  §7.60

10.  Baylin v Commissioner  §7.61

11.  Banks v Commissioner  §7.62

12.  Alternative Minimum Tax Considerations  §7.62A

13.  Determining Person Entitled to Attorney Fees  §7.63

14.  Court Awards of Attorney Fees  §7.64

15.  IRS Field Service Advice May Contraindicate Requirement of Direct Interest in Case  §7.65

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