The Am Law Litigation Daily brings us important news:

Last fall, when the U.S. Court of Appeals for the Federal Circuit took a look, en banc, at the Patent and Trademark Office’s rejection of Bernard Bilski’s application for a patent on a method to hedge risk in commodities trading, Bilski was represented by The

This article in The Philadelphia Inqurier raised an eyebrow or two:

A federal appeals court has upheld the Philadelphia Police Department’s policy that forbids officers to wear Muslim head scarves on the job.

The U.S. Court of Appeals for the Third Circuit ruling, issued Tuesday, affirmed a lower court’s ruling in a 2005 lawsuit filed

[Update — I’ve posted a few followups: Are Facebook’s New Terms of Use Enforceable?, What Do Facebook’s New Terms of Use Mean for Your Content? and Facebook Rescinds Its New, Unfriendly Terms of Use in Favor of Its Old, Unfriendly Terms of Use. Finally, 25 Things About Facebook’s Terms of Use and

Here are the facts, liberally edited by me:

Appellee purchased property for $ 20,000.00, including a building that was deemed uninhabitable by both the City and Appellee.

After Appellee purchased the Property, she contacted the Philadelphia Neighborhood Housing Service (PNHS) to assist her in securing a loan to rehabilitate the Property. A building inspector estimated the cost of renovation and repair to be $ 113,500.00. Another contractor estimated the cost of renovation and repair to be $ 122,590.00.

PNHS agreed to lend Appellee $ 65,000.00 to renovate and repair the Property. PNHS also agreed to help Appellee secure additional financing to reach the estimate provided by the inspector. Appellee successfully received a total mortgage commitment of $ 125,000.00 for the renovation and repair of the Property.

After Appellee received the mortgage commitments, but before any renovations were made, the City tore down the building on the Property.

So, what’s it worth? The relevant Second Restatement of Torts provisions are below the fold.

One answer is market value. Plaintiff certainly didn’t want that: they bought it for $20,000 and it was valued at $35,000 after the demolition, a gain of $15,000.

Another is "special value" (the Restatement calls it "peculiar value"). Here’s what happened at trial:

The trial court read, in pertinent part, the following charge to the jury:

Plaintiff is entitled to be compensated for the harm done to her property. If you find that the property was a total loss, damages are to be measured by either its market value or its special value to the plaintiff, whichever is greater. The plaintiff is entitled to be reimbursed for losses reasonably incurred because of the damage to the property.

The City objected to that part of the trial court’s charge which was based on Section 6.11 of the Pennsylvania Suggested Standard Civil Jury Instructions, 3rd Edition (Jury Instruction). The trial court overruled the City’s objection. The jury found the City negligent in tearing down the building and entered a verdict for the Appellee in the amount of $ 80,000.00.

Oliver-Smith v. City of Philadelphia, 962 A.2d 728 (Pa. Commw. Ct. 2008). The Commonwealth Court reversed, holding:

‘The fundamental purpose of damages for an injury to or destruction of property by the tortious conduct of another is to compensate the injured party for the actual loss suffered.’ Department of Transportation v. Crea, 92 Pa. Commw. 242, 483 A.2d 996, 1001 (Pa. Cmwlth. 1977). Appellee presented evidence that she purchased the Property on April 8, 2003, for $ 20,000.00. The Property was later appraised, prior to demolition, at $ 20,000.00. Appellee did not present any evidence showing that she had spent any money repairing or rehabilitating the Property or that there were any unique characteristics of the Property that warranted a special value. The charge by the trial court of anything further than market value was, therefore, an erroneous extension of the range of permissible damages.

Appellee cannot receive as damages money that she never spent. Such unspent money is not actual damages, but a windfall. Section 911 provides for special value, but only for matters which can be accounted for. In this case, the loss of approved loans/mortgages which were never executed and to which no legal obligation ever attached does not amount to ‘special value.’ The trial court erred in directing the jury. 

There’s definitely a "special value" here: the plaintiff was going to rehabilitate the project and, presumably, re-sell it for a profit. A condemned building might be worth nothing to you and me, but it’s worth a lot to a contractor with a vision. The plaintiff is entitled to recover those damages.

Maybe the plaintiff didn’t present anything but the sizes of the loans, in which case the above is correct. But I bet they did, since the size of the jury’s verdict reflects, in my view, the lost profit on the resale of the property contemplated by the plaintiff once they had rehabilitated and renovated it. Such a number — a projection about future profits — is certainly open to doubt, but it’s a factual issue for the jury, and the defendant (the City of Philadelphia) easily could have presented evidence to the contrary.

Oh well.


Continue Reading Pennsylvania Commonwealth Court Limits the Special Value to the Plaintiff Damages Doctrine

In the comments to “Can the Octuplets Sue for Medical Malpractice,” B. Barton asks:

Numerous sources have reported that Ms. Suleman wanted these [6] remaining embryos transferred [2 of which split into twins]. Where does liability lie if that’s true?

Good question. Since there’s little doubt that it’s a breach in the standard

Continuing on from our discussion yesterday, medical malpractice, like any other negligence tort, is proven by showing:

(1) the defendant had a duty to the plaintiff to act a certain way,

(2) that the defendant breached that duty,

(3) that the defendant’s breach caused the plaintiff harm and

(4) that the harm caused is

Kevin LaCroix at The D&O Diary delivers news that surprises no one, a securities class action based upon Bank of America’s untimely disclosure of Merrill Lynch’s catastrophic losses:

As has been well-publicized, within a matter of weeks of closing its acquisition of Merrill Lynch, Bank of America announced previously undisclosed 4Q08 operating losses at Merrill of $21.5 billion that required BofA to obtain an emergency $20 billion cash injection from the U.S. Treasury, as well as an additional $118 billion asset backstop. BofA’s stock market valuation has dropped more $100 billion since the day before the merger was announced through the company’s January 16 earnings release.

As the Wall Street Journal reported (here), questions immediately arose following BofA’s announcement of the Merrill losses, such as why BofA’s CEO Kenneth Lewis "didn’t discover the problems prior to the Sept. 15 deal announcement" and "why he didn’t disclose the losses prior to the vote on the Merrill deal on Dec. 5 or before closing the deal on Jan. 1."

With these kinds of questions circulating, it comes as no surprise that plaintiffs’ attorneys have initiated litigation. There were actually two different lawsuits announced on January 21, 2009 relating to these circumstances. Both of the lawsuits purport to be filed on behalf of persons who held BofA securities on October 10, 2008, the record date for the December 5, 2009 special meeting of shareholders to approve the merger.

LaCroix, no stranger to director and officer liability, has a thorough take on it, and Ideoblog raises the possibility of a "national interest" exception to securities disclosure laws due to the circumstances: on December 17, Lewis had become so concerned that he went to DC to meet with Bernanke and Paulson for guidance, both of whom, Lewis said, "[were] firmly of the view that terminating or delaying the closing…could result in serious systemic harm."

The Fed denied they requested Lewis to keep quiet. Either way, Lewis obviously knew of the trouble by the December 17 meeting with the Fed, but didn’t report the losses publicly until Bank of America’s next earnings statement on January 16. That’s problematic.

The WSJ Law Blog also flags another action, this one brought by Susman Godfrey, alleging the same, with a particular paragraph of interest in their complaint:

As reported in The Wall Street Journal, just three days after shareholders voted to approve the merger, on December 8, 2008, Merrill’s CEO John Thain addressed a meeting of Merrill’s Board of Directors. Thain reported that Merrill suffered significant losses in November, which Thain described as one of the worse months in Wall Street history. Despite the size of these losses, Thain told Merrill’s board the losses were in line with BOA’s estimates. Neither BOA nor Merrill, nor any of the Individual Defendants, ever disclosed any such estimates . . . to their shareholders in the Proxy Statement. Likewise, no loss estimates were disclosed in any subsequent filings.

Ruh-roh!

  • September 15 — Deal is reached. BoA and ML get to work on details.
  • October 31 — Proxy statement issued to shareholders (you can find it here) in conjunction with the special meeting.
  • December 5 — Special meeting of shareholders, who vote to approve the deal.
  • December 8 — Thain tells ML board of significant losses in November, losses "in line with BOA’s estimates."
  • "Mid December" — Lewis learns of ML’s losses.
  • December 17 — Lewis meets with Bernanke and Paulson
  • January 16 —  BoA discloses losses to shareholders.

Lewis & Thain’s stories are not consistent. Either:

  1. BoA didn’t provide ML estimates like Thain suggested;
  2. Lewis didn’t know about BoA’s own estimates, even though Thain did; or,
  3. Lewis knew sbout ML’s losses sometime significantly before December 8.

The plaintiffs are betting on #3, though they could make hay out of #2. It’s hard to see how anyone could sue for #1 — the BoA deal was the best thing that could have happened to ML, without which ML probably would have collapsed.

Of course, there’s another issue here: both Bank of America and Merrill Lynch were effectively insolvent throughout the plaintiffs’ class period. Both are completely dependent upon emergency government policies to stay operating, and the government has already stepped in to convert the messy merger into a complicated loan and guarantee program.

That is to say, anyone who bought shares of Bank of America in this time frame knew they were buying an effectively insolvent company, and the damages of the Merrill transaction may be, at most, to rearrange the form of Bank of America’s insolvency — possibly to its advantage.

(If you’re not familiar with Section 14(a) shareholder class actions, there’s a little background below the fold.)


Continue Reading Shareholder Suits Launched in the Merrill Lynch / Bank of America Fiasco – Who Fibbed, Thain or Lewis?

So far I’ve seen three legal blogs pick up on Senator Hillary Clinton’s "Emoluments" problem if she’s appointed to serve as Secretary of State: Adam B at DailyKos, Jack Balkin at Balkinzation, and Eugene Volokh at the Volokh Conspiracy. Great work by all three.

The situation is tailor-made for a first-year ConLaw exam.